Ethics in International Arbitration [1 ed.] 0195337697, 9780195337693

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ETHICS IN INTERNATIONAL ARBITRATION

ETHICS IN INTERNATIONAL ARBITRATION Catherine A. Rogers Professor of Law and Paul & Marjorie Price Faculty Scholar Penn State Law Professor of Ethics, Regulation & the Rule of Law Co-Director of the Institute for Ethics & Regulation Queen Mary, University of London

Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2014 The moral rights of the author have been asserted First Edition published in 2014 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2013952798 ISBN 978–0–19–533769–3 (hbk.) ISBN 978–0–19–871320–3 (pbk.) Printed in Great Britain by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

for Elizabeth

AUTHOR BIOGRAPHY Catherine A. Rogers is a Professor of Law and the Paul & Marjorie Price Faculty Scholar at Penn State Law, and the Professor of Ethics, Regulation and the Rule of Law at Queen Mary, University of London, where she is Co-Director, together with Stavros Brekoulakis, of the Institute for Ethics and Regulation. Her scholarship focuses on issues of global legal ethics and international adjudication, and she has taught, lectured, and served as an expert on these topics for various institutions around the world. Professor Rogers is a Reporter for the American Law Institute’s Restatement of the U.S. Law (Third) of International Commercial Arbitration, and a Member of the Court of Arbitration for the Jerusalem Arbitration Center, appointed by the ICC Palestine. Together with William W. ‘Rusty’ Park, she co-chairs the ICCA–Queen Mary Task Force on Third-Party Funding in International Arbitration.  Professor Rogers is also the Founder and Director of Arbitrator Intelligence, an interactive online resource to increase accountability and equal access to information in the arbitrator selection process. 

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FOREWORD A specter is haunting international arbitration: the legitimacy of an arrangement that is a crucial girder supporting the global commercial system has been called into question. The importance of legitimacy to legal and political arrangements, especially those that rely on voluntary participation and compliance, cannot be overstated. Many factors go into eroding the legitimacy of an institution or practice. One of them is uncertainty about the proper standards of behavior of its key actors and principal custodians. I am not implying that the integrity of international arbitrators and counsel has declined in comparison to some past ‘golden age’. Nor do I think that a majority of users and students of the subject feel that the system has been corrupted. But this essentially private form of dispute resolution operates in a global social ecology that includes voracious 24/7 media and blog coverage, whose oracles’ own legitimacy depends in no small measure on regularly demonstrating their inexhaustible moral indignation. Uncertainties as to the governing normative standards can feed impressions of ethical lapses that can, in turn, be roundly denounced, magnified, and generalized to the system as a whole. Those uncertainties are only magnified because, as Professor Rogers convincingly shows, many of the rules governing the system are long outdated while ethical quandaries facing international arbitration are increasingly complex. Thoughtful practitioners and scholars have come to appreciate that diminution of the confidence of the public, of the business community, of government officials and, in particular, of national judiciaries in the fairness and probity of its procedures can undermine the effective functioning of international arbitration itself. This is a specter that can only be exorcised by the installation of common and clear professional ethical standards and of reliable modes for their implementation. In an organized national legal system, such prescriptions and applications take place under the auspices of comparatively homogenous national and sub-national bar associations, all under the watchful eyes of their national courts. But in international arbitration, instead of a homogenous national bar association, hundreds of heterogeneous bar associations, with the potential for significant variations in legal culture and values, preside over their respective jurisdictional fiefdoms. As for implementation, while national professional ethical systems can confidently turn for support to their own national courts, international arbitration incurs significant costs if it relies on those same national courts. To be sure, international arbitration depends on the courts of some 150 states to compel arbitration at the front end of the process, and to enforce its awards at the back, but, as in so many areas of life, too much of a good thing can become toxic: too much national judicial intervention reduces the essential private character of international arbitration. That is why international arbitration has had to recruit and then teach national courts a carefully defined and restrained role; expansion of that role into an additional disciplinary assignment could actually reduce the effectiveness of international arbitration. No surprise, then, that practitioners and scholars of a system, one of whose strengths is its non-governmental character, turn first to self-regulatory arrangements. vii

Foreword There is nothing radical in the proposal that an important transnational activity can be organized privately and regulate itself efficiently. The normative fabric of contemporary international law, understood comprehensively, is interwoven with many public and private strands. The regulation of much of the global financial system is already in the hands of myriad private, transnational commercial and professional associations. Such private arrangements are not always perfect. Like all regulatory systems, they sometimes fail, but the media attention that the few dramatic lapses attract obscures how many of these indispensable arrangements, operating ‘below the radar’, work with a reasonable degree of efficiency. They are not natural or spontaneous but are brought into existence and then function without state or inter-state supervision because inspired leaders and enough of the participants in those sectors appreciate that it is in their shared interest to install and operate arrangements that will sustain the trust of the transnational community in the probity and fairness of the operation of their respective sectors. Losing that public trust, those same leaders appreciate, bodes a decline in the profitability of their activities and, more than likely, the installation of a heavier-handed, if not necessarily more efficient, system of state or inter-state public oversight. If that were to occur to modern international arbitration, it would change its nature and could possibly undermine it. So the incentives to devise modes of self-regulation are compelling. Contemporary international arbitration already incorporates many self-regulatory components. Within the system created by the architectonic New  York Convention on the Recognition and Enforcement of Foreign Commercial Arbitration of 1958, many private associations maintain and constantly and competitively update rules for arbitration while also providing limited forms of application, some of which—for example, back-up selection and recusal of arbitrators—involve the application of professional ethical standards. The New York Convention itself, though a multilateral treaty, was in large part an initiative and handiwork of the private international bar. The creation and installation of a common and effective professional ethical system for international arbitration is possible, practicable, and not without precedent. But it will be challenging, and this is one of the many valuable contributions of Catherine Rogers’ important and timely book. For Professor Rogers, already an acknowledged intellectual leader in the field, has established beyond question the urgent need for the prescription and application of a self-regulatory system of professional ethics in international arbitration. Deploying a profound understanding of international arbitration, she has brilliantly identified the different ethical requirements of the diverse dramatis personae of contemporary international arbitration, assembled and analyzed decision trends, rigorously reviewed and appraised the suggestions of practitioners and scholars, and herself proposed inventive and plausible modes for installing rules and procedures for their implementation. Professor Rogers has written a book that reshapes the intellectual landscape of this fundamental dimension of international arbitration and that is also a pleasure to read. All who labor in international arbitration are indebted to her. W. Michael Reisman Yale Law School  June 27, 2014

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PREFACE My interest in ethics in international arbitration originated with my first professional assignment as a young attorney. I started my law career as a junior associate at a major firm in its Hong Kong-based international arbitration practice. At first, I was thrilled with the assignment. International arbitration was an exotic, cutting-edge practice. Asia was an exciting new frontier. And junior associates in foreign offices were—at that time—exceptionally rare. Professionally, it seemed like I had won the lottery. Only after I started did the dream-come-true job turn into a nightmarish lesson in ethics. It was like I had been dropped into the pages of a John Grisham novel, which ended with the partner for whom I worked being sent to jail for committing serious criminal offenses in a client-related matter. The experience taught me that ethics was not just a subject in law school and an exam for bar admission. Particularly on the frontiers of global legal practice, professional ethics can provide essential guidance when situations are otherwise murky and the way forward is unclear. More importantly, that early experience taught me the value of working with people who have an inherent sense of personal and professional integrity. In the years since that first experience, I have been fortunate enough to work with many such people. The intellectual project that became this book began when I applied to LLM programs as part of my transition from practice to academia. I was drawn to Yale Law School because of Michael Reisman—his early identification of the need for ethics in international arbitration inspired my scholarly interest in this topic. But it was Professor Reisman’s personal encouragement that actually brought me to Yale, and it was his gentle intellectual guidance that helped me to develop and refine the ideas that became the foundations for this book. This book also owes a tremendous personal and professional debt to David Wilkins, who read the first articles I wrote on these topics as a junior law professor, and has provided unrivaled encouragement and intellectual guidance ever since. In those early years, the topic of ethics in international arbitration was considered ‘quaint’, and perhaps only something that a ‘Little Miss Ethics’ might pursue. Professor Wilkins never tired of saying that the world would come to these issues, and I should persevere. There is an old adage is that no book is ever finished, only abandoned. I am fortunate enough to have several friends who intervened at a more personal level to ensure that this work was abandoned only after I sent the draft off to the publisher, most particularly my sister, Elizabeth. I am also especially indebted to Chris Drahozal, who painstakingly read more drafts and answered more late-night emails than could reasonably be expected, and to Henry Brown, Jeff White, Paula Caligiuri, Jack Rock, and Mara Bertolotti, both for their enthusiasm and for convincingly feigning interest in the field. Some important themes in this work involve the relationship between insiders and outsiders and the complex nuances of actual international arbitration practice. These themes are difficult to explore as an academic, now detached from the professional practice but trying to ix

Preface peer back into a field notorious for its lack of transparency. Discussions of these topics at various professional conferences and in numerous classrooms helped to bridge that gap. I also benefitted tremendously from the time and energy of several leading arbitration specialists, who generously shared their insights with me and provided invaluable comments on previous drafts, among them Jose Astigarraga, George Bermann, Gary Born, Stavros Brekoulakis, Charlie Brower, Petra Butler, Tom Carbonneau, James Castello, Jack Coe, Caroline Foster, Susan Franck, Lord David Hacking, Marin Hunter, Julian Lew, Michael McIlwrath, Rusty Park, Lucy Reed, Edna Sussman, Audley Sheppard, Patricia Shaughnessy, Mick Smith, Stacie Strong, Laurel Terry, Anne van Aaken, Albert Jan van den Berg, Detlev Vagts, Johnny Veeder, Marco Ventoruzzo, and Stephan Wilske. At a more technical level, this work benefitted from the outstanding assistance of editor and research fellow extraordinaire, Alex Wiker, for whom no task was too big or too small. Numerous administrative and research assistants contributed in important ways, but several went above and beyond, including Hayati Irkicatal and Inan Uluc (my tireless ‘Bluebook Heroes’), Emily Franco, Jeff Jeng, Justin Krajeski, Adam Martin, Morgan Rhinehart, Idil Tumer, and Cynthia Yan. Material research support from Penn State Law and Queen Mary, University of London was generously facilitated by deans Phil McConnaughay, Jim Houck, and Spyros Maniatis, and Bocconi University also provided important support. Finally, I am grateful to my editors at Oxford University Press, Vicky Pittman, Rachel Holt, Erin Pearson, and Elissa Hansen, all of whom demonstrated both editorial skill and exceptional patience. Even with such assistance and support, the closer this work has come to publication, the more its many errors and omissions have become apparent. It is, in a very real sense, not finished but only being abandoned. It is hoped that future editions will be able to rectify some of its errors, in particular by drawing from extended primary research that takes more careful account of developments in regions outside of Europe and North America and beyond English-language sources, as well as innumerable developments that are occurring even as this book is going to press. To that end, all comments, questions, and corrections, and particularly reports and examples from those many jurisdictions not expressly covered in this volume, are welcome. Catherine A. Rogers April 2014

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ACKNOWLEDGEMENTS In many places, this volume draws ideas and analysis from my earlier works, including: ‘Transnational Litigation and Professional Ethics’, in Barton Legum et al. (eds.), International Litigation Strategies and Practice (American Bar Association, 2nd edn., 2014) (with Detlev Vagts). ‘Guerrilla Tactics and Ethical Regulation’, in Günther J.  Horvath and Stephan Wilske (eds.), Guerrilla Tactics in International Arbitration: Ethics Practice and Remedies (Kluwer Law International, 2013).  ‘The Politics of International Investment Arbitrators’, 12(1) Santa Clara J.  Int’l L.  223 (2013). ‘When the Bad Guys Are Wearing White Hats’, 1 Stan. J. Complex Litig. 487 (2013). ‘Cross-Border Bankruptcy as a Model for Regulation of International Attorneys’, in Pieter H. F. Bekker et al. (eds.), Making Transnational Law Work in a Global Economy: Essays in Honour of Detlev Vagts (Cambridge University Press, 2010). ‘Lawyers Without Borders’, 30 U. Pa. J. Int’l L. 1035 (2009). ‘The Ethics of International Arbitrators’, in Richard Hill et al. (eds.), The Leading Arbitrators’ Guide to International Arbitration (Juris Publishing, 2nd edn., 2008). ‘The Arrival of the “Have-Nots” in International Commercial Arbitration’, 8 Nev. L.J. 341 (2007). ‘Transparency in International Commercial Arbitration’, 54 U. Kan. L. Rev. 1301 (2006). ‘The Vocation of International Arbitrators’, 20 Am. U. Int’l L. Rev. 957 (2005). ‘Regulating International Arbitrators: A Functional Approach to Developing Standards of Conduct’, 41 Stan. J. Int’l L. 53 (2005). ‘Context and Institutional Structure in Attorney Regulation: Constructing an Enforcement Regime for International Arbitration’, 39 Stan. J. Int’l L. 1 (2003). ‘Fit and Function in Legal Ethics:  Developing a Code of Conduct for International Arbitration’, 23 Mich. J. Int’l L. 341 (2002).

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CONTENTS Table of Cases

xv

Introduction

1

A. Thesis and themes

1

B. Terminology

9

C. Methodology

12

D. Overview of the argument

13

E. Conclusion

14 I  MAPPING THE TERRAIN

1.  From an Invisible College to an Ethical No-Man’s Land

17

A. The early modern international arbitration system

1.12

B. Modern international arbitration

1.24

C. Globalization of the legal profession

1.43

D. Regulation of transnational law practice

1.54

E. Regulation of attorneys in international arbitration

1.73

F. Conclusion

1.105

2.  Arbitrators, Barbers, and Taxidermists

57

A. Arbitrator selection and the marketplace for arbitrator services

2.11

B. Sources of international arbitrators’ ethical duties

2.49

C. International arbitrators’ substantive ethical obligations

2.101

D. Conclusion

2.130 99

3.  Attorneys, Barbarians, and Guerrillas A. Counsel ethics in international arbitration proceedings

3.10

B. National differences in ethical rules

3.30

C. Internationalization and enforcement

3.84

D. Conclusion

3.99 139

4.  Experts, Partisans, and Hired Guns A. Comparative differences in expert witnessing

4.08

B. Expert witnesses in international arbitration

4.47

C. Procedural reforms and the panda’s thumb

4.82

D. Conclusion

4.104 xiii

Contents 5.  Gamblers, Loan Sharks, and Third-Party Funders A. Definitions and mechanics

177 5.18

B. Funders and other participants in international arbitration

5.36

C. Regulation of third-party funding in international arbitration

5.107

D. Conclusion

5.132

II  STAKING OUT THEORETICAL BOUNDARIES AND BUILDING THE REGIME 6.  Chanticleer, the Fox, and Self-Regulation

221

A. Defining self-regulation

6.10

B. Self-regulation in international arbitration

6.44

C. Conclusion

6.166

7.  Ariadne’s Thread and the Functional Thesis

274

A. A theory of professional ethics

7.07

B. The Functional Thesis as a prescriptive tool

7.66

C. Conclusion

7.100

8.  Herodotian Myths and the Impartiality of Arbitrators

311

A. The myth of the ‘non-humanness of judges’

8.05

B. The new role and new ethics of investment arbitrators

8.14

C. Impartiality obligations of party-appointed arbitrators

8.37

D. Reforming and refining the selection process

8.77

E. Conclusion

8.108

9. Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators

343

A. Competing models of international arbitration

9.03

B. Squinting hard to see arbitrators’ duality

9.18

C. Conclusion

9.68

10. Castles in the Air and the Future of Ethics in International Arbitration

365

A. The future of international arbitration

10.03

B. The future of ethics in international arbitration

10.10

C. The future of ethical self-regulation

10.29

Index

373

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TABLE OF CASES CASES BY COUNTRY Australia Campbells Cash & Carry Pty Ltd. v Fostif Pty Ltd., [2006] 229 CLR 386����������������������������� 5.39, 5.44 Austria Vienna Commercial Court, 24 July 2007, Case 16 No. 2/07w (unpublished) ��������������������������������2.86 Belgium République de Pologne v Eureko BV, Brussels Court of Appeal, Case No. R G 2007/AR/70 (29 Oct. 2007), 26 ASA Bull 565 (2008)��������������������������������������������������������������������������������2.86 Canada Vaughan v Menlove (1837), 3 Bing. N.C. 467, 132 E.R. 490 ��������������������������������������������������������6.65 France Bompard v Consorts C. et al. Judgment, Tribunal de grande instance [TGI] Paris, 13 June 1990, 1996 Rev. rb. 475, aff ’d, Judgment, Cour d’appel [CA] Paris, 22 May 1991, 1996 Rev. arb. 475 (Fr.)������������������������������������������������������������������������������������������������������������������2.02 J&P Avax SA v Tecnimont SPA, Cour d’appel [CA] Reims, 2 Nov. 2011, Case No. 10/02888 �����������������������������������������������������������������������������������������2.75, 6.87, 6.95 Judgment, Cour de cassation [Cass.] 1e civ., 17 Nov. 2010, 2011 Rev. arb. 943������������������������������2.02 Raffineries de pétrole d’Homs et de Banias v Chambre de Commerce Internationale, Judgment of 28 March 1984, 1985 Rev. arb. 141 (Paris Tribunal de grande instance)�������������������������������������������������������������������������������������������������������������������������� 9.21 Societe Annahold BV et al. v L’Oreal, Cour d’appel [CA] Paris, [1986] Rev. Arb. 483 ��������������������5.92 Société Qualiconsult v Groupe Lincoln, Judgment of 19 December 1996, 1998 Rev. Arb.121, (Paris Cour d’appel) ��������������������������������������������������������������������������������������������������������������9.12 T.A.I. v S.I.A.P.E., Cour d’appel [CA] Paris, 2 June 1989, [1991] Rev. Arb. 87��������������������������������5.92 Germany Judgment of 18 May 1904, RGZ 59, 247 (German Reichsgericht) ������������������������������������������������9.23 OLG Frankfurt 26 Civil Division, 4 Oct. 2007, Case No. 26 Sch 8/07 ������������������������������������������2.86 Hong Kong Cannonway Consultants Ltd. v Kenworth Eng’g Ltd. [1995] 1 HKC 179. . . . . . . . . . . . . . . . . . . . 5.46 Netherlands Republic of Ghana/Telekom Malaysia Berhad, Arrondissementsrechtbank [Rb.], District Court, The Hague, Challenge No. 13/2004, Petition No. HA/RK 2004.667, (18 Oct. 2004), available in English in 20 Mealey’s Int’l Arb. Rep. No. 1; Document No. 05–050128–010Z ���������������������������������������������������������������������� 8.25–8.27, 8.36

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Table of Cases Singapore Law Society of Singapore v Kurubalan s/o Manickam Rengaraju, [2013] SGHC 135 ��������������������5.54 Otech Pakistan Pvt. Ltd. v Clough Eng’g Ltd., [2006] SGCA 46������������������������������������������� 5.38, 5.47 Turner (East Asia) Pte. Ltd v Builders Federal (Hong Kong) Ltd (1988) 2 MLJ 280 (Sing.)���������� 1.79–1.80 South Africa Headleigh Private Hospital (Pty) Ltd t/a Rand Clinic v Stoller & Manning Attorneys and Others 2001 (4) SA 360 (W)��������������������������������������������������������������������������������������������������5.39 PriceWaterHouseCoopers, Inc and Others v National Potato Co-operative Ltd. 2004 (6) SA 66 (SCA)��������������������������������������������������������������������������������������������������������������������������5.39 Sweden Anders Jilkén v Ericsson AB, Nyutt Juridiskt Arkiv [NJA] [Supreme Court] 2007–11–19 T2448–06, 5 Stockholm Int’l Arb. Rev. 167 (2007)����������������������������������������������������������������2.86 Korsnäs Aktiebolag v AB, Fortum Värme samägt med Stockholms stad, [Svea Ct. of App.] 2008–12–10 (unpublished)�������������������������������������������������������������������������������������������������������� 2.67 Switzerland A v B, Case No. 4P.242/2004 (Swiss Supreme Court (1st Civil Chamber) 2004)����������������������������8.33 Bundesgricht [BGer] [Federal Supreme Court] 20 Mar. 2008, Case No. 4A.506/2007, 26 ASA Bull 565 (2008)��������������������������������������������������������������������������������������������������������2.67 Tunisia Judgment of 22 March 1976, III Y.B. Comm. Arb. 283 (Tunis Court of First Instance) (1978)��������� 5.37 United Kingdom A v B and X, [2011] EWHC (Comm) 2345������������������������������������������������������������������������� 2.72, 6.62 Arab African Energy Corp. v Olieprodukten Nederland B., [1983] 2 Q.B. 419������������������������������9.06 Arenson v Casson Beckman Rutley & Co. [1977] AC 405��������������������������������������������������������������9.38 Arkin v Borchard Lines, [2005] EWCA (Civ) 655������������������������������������������������������������������������5.125 ASM Shipping Ltd of India v TTMI Ltd of England, [2005] APP.L.R. 10/19 (comm.) (19 Oct. 2005)����������������������������������������������������������������������������������������������������������������������2.86 AT&T Corp. v Saudi Cable Co., [2000] EWCA (Civ) 154���������������������2.72, 2.76, 2.104, 2.107, 6.62 Factortame Ltd. v Sec. of State for the Env., Transport & Regions (No. 2), (2003) Q.B. 381������������� 5.39 Giles v Thompson, [1993] UKHL 2, [1994] 1 AC 142, [1993] 3 All ER 321����������������������������������5.46 Jivraj v Hashwani [2011] UKSC 40 ������������������������������������������������������������������� 9.13, 9.21, 9.22, 9.28 K/S Norjarl A/S v Hyundai Heavy Indus. Co. Ltd [1992] 1 Q.B. 863��������������������������������������������9.12 Laker Airways v FLS Aerospace [1999] 2 Lloyds Rep 45 ����������������������������������������������������������������6.77 Locabail (UK) Ltd. v Bayfield Properties Ltd., [1999] EWCA (Civ) 3004, [2000] Q.B. 451, 478������������������������������������������������������������������������������������������������������������������������6.87 Magill v Porter, [2001] UKHL 67��������������������������������������������������������������������������������������������������5.92 Mansell v Robinson [2007] EWHC 101 (QB) ������������������������������������������������������������������������������5.46 Petroleum Development (Trucial Coast) Ltd. v Sheikh of Abu Dhabi (1951) Award, 18 I.L.R. 144 ������������������������������������������������������������������������������������������������������������������������1.19

xvi

Table of Cases Pinochet, In re, Oral Judgment 17 December 1998 and Reasons 15 January 1999, [1999] UKHL 52������������������������������������������������������������������������������������������������������������������������������5.92 Simpson v Norfolk & Norwich Univ. Hosp. NHS Trust (2011) EWCA 1149��������������������������������5.39 Smith v Kvaerner Cementation Foundations Ltd [2006] 3 All ER 593��������������������������������������������6.77 Stone & Rolls Ltd. v Moore Stephens, [2007] EWHC (Comm) 1826, [2009] 1 A.C. (H.L.) 1391��������������������������������������������������������������������������������������������������������������5.125 Succula Ltd and Pomona Shipping Co. Ltd v Harland and Wolff Ltd, 2 Lloyd’s Rep. 381 (1980) ����������������������������������������������������������������������������������������������������������������������������������9.05 Sutcliffe v Thackrah [1974] 1 All E.R. 859 (House of Lords)����������������������������������������������������������9.37 Trendtex Trading Corp. v Credit Suisse (1982) AC 679������������������������������������������������������������������5.39 Tripeca Mines Ltd, In re [1962] 3 All E.R 351��������������������������������������������������������������������������������5.45 Winterthur Swiss Ins. Co. v AG (Manchester) Ltd., [2006] EWHC (Comm) 839��������������������������5.66 United States Abrams, In Matter of, 62 N.Y.2d 183 N.Y.S.2d 494 N.E.2d 1������������������������������������������������������6.149 Abu-Ghazaleh v Chaul, 36 So. 3d 691 (Fla. Dist. Ct. App. 2009) ��������������������������������������������������5.59 Al-Harbi v Citibank, N.A., 85 F.3d 680 (D.C.Cir. 1996) ����������������������������������������������������� 2.10, 6.84 Andros Compania Maritima, SA v Marc Rich 8 Co., 579 F.2d 691 (2d Cir. 1978)��������������������������5.77 ANR Coal Co. v Cogentrix of N.C., 173 F.3d 493 (4th Cir. 1999) ������������������������������������������������2.87 Applied Indus. Materials Corp. v Ovalar Makine Ticaret Ve Sanayi, A S, 492 F.3d 132 (2d Cir. 2007)���������������������������������������������������������������������������������������������������� 2.67, 2.115, 6.87 Areca, Inc. v Oppenheimer 8 Co., Inc., 960 F. Supp. 52 (S.D.N.Y. 1997) ��������������������������������������8.03 Austern v Chi. Bd. Options Exch., Inc., 898 F.2d 882 (2d Cir. 1990) ��������������������������������������������9.38 Babylon Milk & Cream Co. v Horvitz, 151 N.Y.S.2d 221 (N.Y. S.Ct. 1956)����������������������������������9.37 Bak v MCL Fin. Group, Inc., 88 Cal. Rptr. 3d 800 (Cal. Ct. App. 2009)��������������������������������������6.158 Baravati v Josephthal, Lyon & Ross, Inc., 28 F.3d 704 (7th Cir. 1994)����������������������������������� 9.01, 9.16 Betz v Pankow, 31 Cal. App.4th 1503 (1995)��������������������������������������������������������������������� 2.115, 6.84 Bidermann Indus. Licensing Inc. v Avmar N.V., 173 A.D.2d 401 (1991) ������������������������������������6.150 Birbrower, Montalbano, Condon & Frank, P.C. v Superior Court, 949 P.2d 1 (Cal. 1998)��������������1.88 B.L. Harbert Int’l v Hercules Steel Co., 441 F.3d 905 (11th Cir. 2006) ������������������������������������������3.78 Blue Cross Blue Shield v Juneau, 114 S.W.3d 126 (Tex. App. 2003) ����������������������������������������������2.98 Bluebird Partners v First Fid. Bank, N.A., 709 N.Y.S.2d 865 (2000)����������������������������������������������5.40 Bordonaro v Merrill Lynch, Pierce, Fenner & Smith, 805 N.E.2d 1138 (Ohio App. 2004) ������������4.10 Boyd Bros. Transp. Co. v Fireman’s Fund Ins. Co., 729 F.2d 1407 (11th Cir. 1984)��������������� 5.34, 5.60 Bush v Gore, 531 U.S. 98 (2000) ��������������������������������������������������������������������������������������������������7.51 Cache Le Poudre Feeds, LLC v Land O’Lakes, Inc., 244 F.R.D. 614 (D. Colo. 2007) ��������������������3.50 Canaan Venture Partners, L.P. v Salzman, CV 950144056S, 1996 WL 62658 (Conn. Super. Ct. 28 Jan. 1996) ����������������������������������������������������������������������������������������������������������������6.149 Cappel v Adams, 434 F.2d 1278 (5th Cir. 1970)����������������������������������������������������������������������������3.81 Chevron Corp., In re, 749 F. Supp. 2d 141 (S.D.N.Y. 2010), aff ’d sub nom. Lago Agrio Plaintiff s v Chevron Corp., 409 F. App’x. 393 (2d Cir. 2010) ������������������������������������������������1.57 Chevron Corp. v Donziger, 2013 WL 1087236 (S.D.N.Y. Mar. 15, 2013) adhered to on reconsideration, 2013 WL 1975439 (S.D.N.Y. 14 May 2013)������������������������������������� 5.20, 5.133 Cole Publ’g Co., Inc. v John Wiley & Sons, Inc., In Matter of Arbitration between, 1994 WL 532898, *2 (S.D.N.Y. 29 Sept. 1994)������������������������������������������������������������������� 2.107, 7.50 Commonwealth Coatings v Continental Casualty, 393 US 145 (1968)��������������������������������� 5.92, 6.63 Concat LP v Unilever, PLC, 350 F. Supp. 2d 796 (N.D. Cal. 2004)����������������������������������������������6.149 Cont’l Ins. Co. v Bayless & Roberts, Inc., 608 P.2d 281 (Alaska 1980)��������������������������������������������5.60 Cook Chocolate Co. v Salomon Inc., 87 CIV. 5705 (RWS), 1988 WL 120464 (S.D.N.Y. 28 Oct. 1988)����������������������������������������������������������������������������������������������������������������������6.149 Croushore v Buchanan Ingersoll P.C., 32 Pa. D. 8 C.4th 142 (Pa. Com. Pl. 1996)������������� 6.149, 6.150

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Table of Cases Delta Mine Holding Co. v AFC Coal Properties, 280 F.3d 815 (8th Cir. 2001)������������������������������2.87 DigiTelCom, Ltd. v Tele2 Sverige AB, 12 CIV. 3082 RJS, 2012 WL 3065345 (S.D.N.Y. 25 July 2012) ������������������������������������������������������������������������������������������������������������������������2.05 DiMercurio v Sphere Drake Ins., PLC, 202 F.3d 71 (1st Cir. 2000)������������������������������������������������7.71 E.C. Ernst, Inc. v Manhattan Constr. Comp., 551 F.2d (5th Cir. 1977)��������������������������������� 2.98, 9.40 Echeverria v Estate of Lindner, 7 Misc.3d 1019(A), (Sup. Ct. Nassau Cy. 2005)�����������������������������5.41 Empresa Constructora Contex Ltda. v Iseki, Inc., 106 F. Supp. 2d 1020, 1024–5 (S.D. Cal. 2000)��������������������������������������������������������������������������������������������������������������������5.77 Erdheim v Selkowe, Matter of, 51 A.D.2d 705 ����������������������������������������������������������������������������6.150 Fausone v US Claims, Inc, 915 So.2d 626 (Fla Ct App 2d Dist 2005)��������������������������������������������5.42 F.D.I.C. v Bender, 127 F.3d 58 (D.C. Cir. 1997)����������������������������������������������������������������������������3.81 Fils Et Cables d’Acier De Lens v Midland Metals Corp., 584 F. Supp. 240 (S.D.N.Y. 1984)������������9.33 First Interregional Equity Corp. v Haughton, 842 F. Supp. 105 (S.D.N.Y. 1994)����������������������������8.03 Forest Elec. Corp. v HCB Contractors, 1995 WL 37586 (E.D.Pa. 1995)�������������������������������������2.111 Fornell v Morgan Keegan & Co., Inc., 6:12–CV-38–ORL-28TBS, 2012 WL 3155727 (M.D. Fla. Aug. 3, 2012)�������������������������������������������������������������������������������������������������������2.05 Gardemal v Westin Hotel Co., 186 F.3d 588 (5th Cir. 1999)����������������������������������������������������������5.94 Gateway Techs., Inc. v MCI Telecomm. Corp., 64 F.3d 993 (5th Cir. 1995) ����������������������������������9.33 Gianelli Money Purchase Plan & Trust v ADM Inv. Servs., Inc., 146 F.3d 1309 (11th Cir. 1998)����������������������������������������������������������������������������������������������������������� 5.76, 6.84 Gilmer v Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)��������������������������������������������������������9.04 Girardi, In re, 611 F.3d 1027 (9th Cir. 2010), amended, 08–80090, 2010 WL 3517899 (9th Cir. Sept. 10, 2010)��������������������������������������������������������������������������������������������������������1.57 Gulf Petro Trading Co. v Nigerian Nat. Petroleum Corp., 512 F.3d 742 (5th Cir. 2008) ����������������4.73 Hall v Clifton Precision, 150 F.R.D. 525, 528 (E.D. Pa. 1993)������������������������������������������������������3.21 Hall v State, 655 A.2d 827, 829–30 (Del. Super. Ct. 1994)��������������������������������������������������� 5.40, 5.47 Hamdi & Ibrahim Mango Co. v Fire Ass’n of Phila., 20 F.R.D. 181 (S.D.N.Y. 1957) ����������� 3.21, 3.33 Hesfibel Fiber Optik v Four S Group, 315 F. Supp.2d 1365 (D. Fla. 2004) ������������������������������������4.10 Holodnak v Avco Corp., 381 F. Supp. 191 (D. Conn. 1974), aff ’d in part, rev’d in part on other grounds, 514 F.2d 285 (2d Cir. 1975)����������������������������������������������������������������� 2.107, 7.50 Hoosac Tunnel Dock & Elevator Co. v O’Brien, 137 Mass. 424, 426 (Mass. 1884)������������������������9.37 Hottle v BDO Seidman, LLP, 846 A.2d 862 (Conn. 2004)������������������������������������������������������������9.27 Hozlock v Donegal Companies/Donegal Mut. Ins. Co., 745 A.2d 1261 (Pa. Super. Ct. 2000)��������4.68 Hunt v Mobil Oil Corp., 654 F. Supp. 1487 (S.D.N.Y. 1987)��������������������������������������������������������5.77 Ingersoll-Rand Equip. Corp. v Transp. Ins. Co., 963 F. Supp. 452 (M.D. Pa. 1997)������������������������5.34 Int’l Union, United Auto., Aerospace & Agric. Implement Workers v Greyhound Lines, 701 F.2d 1181 (6th Cir. 1983)������������������������������������������������������������������������������������������������9.38 Iran-United States, Case No. A/18, 5 Iran-U.S. Cl. Trib. Rep. 251 (1984)��������������������������������������2.03 Isbell v County of Sonoma, 21 C3d 61 (1972) ������������������������������������������������������������������������������9.31 Johnson v Wright, 682 N.W.2d 671 (Minn. Ct. App. 2004)����������������������������������������������������������5.47 Kern v 303 East 57th Street Corp., 204 A.D.2d 152 (N.Y. App. Div. 1994)����������������������������������2.106 Kirk v Raymark Indus. Inc., 61 F.3d 147 (3d Cir. 1995) ����������������������������������������������������������������4.12 Kyocera Corp. v Prudential-Bache Trade Services, Inc., 341 F.3d 987 (9th Cir. 2003) ��������������������8.06 L&H Airco, Inc. v Rapistan Corp., 446 N.W.2d 372 (Minn. 1989) ����������������������������������������������2.98 LaPine Tech. Corp. v Kyocera Corp., 130 F.3d 884 (9th Cir. 1997)��������������������������������������� 8.07, 9.33 Lawsuit Fin. v Curry, 683 N.W.2d 233 (Mich. Ct. App. 2004)������������������������������������������������������5.41 Leader Techs. v Facebook, Inc., 719 F. Supp. 2d 373 (D. Del. 2010)����������������������������������������������5.66 Liberty Mut. Ins. Co. v Ameta 8 Co., 564 F.2d 1097 (4th Cir. 1977)����������������������������������������������3.82

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Table of Cases Lifecare Int’l Inc. v CD Medical, Inc., 68 F.3d 429 (11th Cir. 1995) �������������������������� 2.115, 3.77, 6.84 Lifestar Response of Ala., Inc. v Admiral Ins. Co., 17 So. 3d 200 (Ala. 2009)����������������������������������5.34 Lozano v Maryland Casualty C., 850 F.2d 1470 ������������������������������������������������������������������� 8.03, 8.38 Luis Acosta, Inc. v Citibank, N.A., 920 F. Supp. 15 (D.P.R. 1996)��������������������������������������������������9.06 Majorowicz v Allied Mut. Ins. Co., 569 N.W.2d 472 (Wis. Ct. App. 1997)������������������������������������5.60 McCullar v Credit Bureau Sys., Inc., 832 S.W.2d 886 (Ky. 1992) ��������������������������������������������������5.47 Merit Ins. Co. v Leatherby Ins. Co., 714 F.2d 673 (5th Cir. 1983) (Posner, J.)������������������������������2.106 Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc, 473 US 614 (1985) 1.16, 6.54��������������9.04 Mondis Tech. v LG Electronics, Nos. 2:07–CV–565–TJW–CE, 2:08–CV–478–TJW, 2011 WL 1714304 (E.D. Tex. 4 May 2011) ��������������������������������������������������������������������������5.66 Morales Rivera v Sea Land of Puerto Rico, Inc., 418 F.2d 725 (lst Cir. 1969)����������������������������������7.73 Morelite Construction Corp. v N.Y.C. District Council Carpenters’ Benefit Funds, 748 F.2d 79 (2d Cir. 1984)������������������������������������������������������������������� 2.105, 2.106, 5.104, 8.03 Morgan Phillips, Inc., v JAMS/Endispute, 140 Cal. App. 4th 795 (Ct. App. 2006)��������������� 2.98, 9.40 M/S Bremen v Zapata Off-Shore Co., 407 US 1 (1972) ����������������������������������������������������������������5.37 Munich Re America Inc. v Ace Property & Casualty Co., 500 F.Supp.2d 272 (S.D.N.Y. 2007)������� 6.150 New Regency Prods. v Nippon Herald Films, 501 F.3d 1101 (9th Cir. 2007)���������������� 2.67, 5.76, 6.87 Oil, Inc. v Martin, 44 N.E.2d 596 (Ill. 1942)��������������������������������������������������������������������������������5.48 Olan v Allstate Ins. Co., 622 N.Y.S.2d 33 (App. Div. 1995)������������������������������������������������������������4.10 Osprey, Inc. v Cabana Ltd. P’ship, 532 S.E.2d 269 (S.C. 2000)������������������������������������������������������5.40 Pac. Emp’rs Ins. Co. v P.B. Hoidale Co., 789 F. Supp. 1117 (D. Kan. 1992)��������������������������� 5.34, 5.60 Peoples Sec. Life Ins. Co. v Monumental Life Ins. Co., 991 F.2d 141 (4th Cir. 1993)��������������������2.115 Perry, In re, 53 A.D.2d 882, 385 N.Y.S.2d 589, (2d Dept.), appeal dismissed, 40 N.Y.2d 1078, 392 N.Y.S.2d 1029, 360 N.E.2d 964 (1976)��������������������������������������������������������������������������7.29 Play Visions, Inc. v Dollar Tree Stores, Inc., 2011 WL 2292326 (W.D. Wash. 2011)����������������������3.49 Polin v. Kellwood Co., 103 F. Supp. 2d 238 (S.D.N.Y. 2000), aff ’d, 34 F. App’x 406 (2d Cir. 2002)����������������������������������������������������������������������������������������������������������������������6.158 Priest v Hennessy, 409 N.E.2d 983 (N.Y. 1980) ����������������������������������������������������������������������������5.31 Primus, In re, 436 US 412 (1978)��������������������������������������������������������������������������������������������������5.38 R3 Aerospace Inc., Marshall of Cambridge Aerospace Ltd, In Matter of Arbitration between, 927 F.Supp. 121, 123 (S.D.N.Y. 1996)��������������������������������������������������������������������������������6.150 Reeves Bros. v Capital-Mercury Shirt Cor., 962 F. Supp. 408 (S.D.N.Y. 1997) ������������������������������8.03 Richmond Newspapers, Inc. v Virginia, 448 U.S. 555 (1980)��������������������������������������������������������7.20 Rios v Tri-State Ins. Co., 714 So. 2d 547 (Fla. Dist. Ct. App. 1998)������������������������������������������������4.68 S & S Hotel Ventures v 777 S.H. Corp., 69 N.Y.2d 437 N.Y.S.2d 735, 508 N.E.2d (647)������������6.149 S & T Oil Equip. v Juridica Invs. Ltd., 2012 WL 28242 (5th Cir. 2012)����������������������������� 5.20, 5.115 Saladini v Righellis, 687 N.E.2d 1224, (Mass. 1997)����������������������������������������������������������������������5.40 Sampliner v Motion Picture Patents Co., 255 F. 244 (2d Cir. 1918), rev’d on other grounds, 254 U.S. 233 (1920)��������������������������������������������������������������������������������������������������������������5.53 Scherk v Alberto-Culver Co., 417 US 506 (1974)��������������������������������������������������������������������������5.37 Schmitz v Zilveti, 20 F.3d 1043 (9th Cir. 1994) �������������������������������������������������������� 2.115, 6.84, 7.21 SOC-SMG, Inc. v Day & Zimmermann, Inc., 5375–VCS, 2010 WL 3634204 (Del. Ch. 15 Sept. 2010) ��������������������������������������������������������������������������������������������������������������������6.149 Sphere Drake Ins. v All American Life Ins., 307 F.3d 617 (7th Cir. 2002) . . . . . . . . . . . 2.87, 4.68 8.03 Stratosphere Corp. Sec. Litig, In re., 182 F.R.D. 614 (D. Nev. 1998)����������������������������������������������3.21 Stumpf v Cont’l Cas. Co., 794 P.2d 1228 (Or. Ct. App. 1990)��������������������������������������������������������5.60 Sunkist Soft Drinks, Inc. v Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993)���������1.31, 2.16, 4.68, 8.38 Team Design v Gottlieb, 104 S.W.3d 512 (Tenn. Ct. App. 2002) ��������������������������������������������������9.16 Toyota of Berkeley v Auto. Salesman’s Union, 834 F.2d 751 (9th Cir. 1987)������������������������������������8.03

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Table of Cases United Transp. Union v Gateway W. Ry. Co., 284F.3d 710 (7th Cir. 2002)������������������������������������4.68 Universal Reins. Corp. v Allstate Ins. Co., 16 F.3d 125 (7th Cir. 1994) ������������������������������������������9.26 Utility Oil Corp., 10 F.Supp. 678 (S.D.N.Y. 1934)������������������������������������������������������������������������9.32 Vimar Seguros y Reaseguros, S.A. v M/V Sky Reefer, 29 F.3d 727 (lst Cir. 1994), aff ’d, 515 U.S. 528 (1995)��������������������������������������������������������������������������������������������������������������7.73 Wasyl, Inc. v First Bos. Corp., 813 F.2d 1579 (9th Cir. 1987)��������������������������������������������������������9.38 Westinghouse Electric Corp. v New York City Transit Authority, 623 N.E.2d 531 (N.Y. 1993)��������� 9.27 Wheeler v St. Joseph’s Hospital, 63 Cal.App.3d 345 (1976)����������������������������������������������������������2.115 Wilko v Swan, 346 US 427 (1953)������������������������������������������������������������������������������������������������9.06 Woods v Saturn Distrib. Corp., 78 F.3d 424 (9th Cir. 1996)������������������������������������������������� 5.77, 9.27 World Bus. Paradise, Inc. v Suntrust Bank, 403 F. App’d 468 (11th Cir. 2010)����������������������� 2.05, 3.78 Wurttembergisch Fire Ins. Co. v Republic Ins. Co., 86 CIV. 2696 CSH, 1986 WL 7773 (S.D.N.Y. 9 July 1986)��������������������������������������������������������������������������������������������������������6.149 Zarcone v Perry, 572 F.2d 52 (2d Cir. 1978)����������������������������������������������������������������������������������7.29 INTERNATIONAL CASES European Union Akzo Nobel Chem. Ltd. v Eur. Comm’n. [Case C-550/07 P], 2010 ECR I-08301��������������������������3.64 AM & S Eur. Ltd. v Comm’n. [Case 155/79] 1982 ECR 01575 ����������������������������������������������������3.64 International Court of Justice Corfu Channel case (United Kingdom v Albania), Order of 17 Dec. 1948, ICJ Rep. 1947–1948������������������������������������������������������������������������������������������������������������������� 4.35, 4.40 Gabcıkovo-Nagymaros Project (Hungary/Slovakia), Judgment of 25 Sept. 1997, ICJ Reports 1997 ������������������������������������������������������������������������������������������������������������������������4.41 Pulp Mills on the River Uruguay (Argentina v Uruguay), Request for the Indication of Provisional Measures, Order of 13 July 2006, ICJ Reports 2006������������������������������������� 4.40, 4.41 ICSID Caratube Int’l Oil Co. LLP v Kazakhstan, ICSID Case No. ARB/08/12, Award (5 Jun. 2012)��������4.58 Compañía de Aguas del Aconquija S.A. v Argentina, ICSID Case No. ARB/97/3, Decision on the Argentine Republic’s Request for Annulment of the Award rendered on 20 August 2007, 10 Aug. 2010 ��������������������������������������������������������������������������������������������������������������6.86 Compañiá del Desarrollo de Santa Elena, S.A. v Costa Rica, ICSID Case No. ARB/96/1, (2000) 15:1 ICSID Review FILJ��������������������������������������������������������������������������������������������4.12 EDF (Servs.) Ltd v Romania, ICSID Case No ARB/05/13, 2008 ������������������������������������������������6.132 Fraport Ag Frankfurt Airport Servs. Worldwide v Philippines, ICSID Case No. ARB/03/25, Annulment Proceeding, Decision on Application for Disqualification of Counsel, 18 Sept. 2008��������������������������������������������������������������������������������������� 3.63, 6.147, 6.154, 6.157 Highbury International AVV v Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/1, Decision on Disqualification of Counsel, 10 Aug. 2011��������������������������������������������������������6.154 Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling regarding the participation of David Mildon QC in further stages of the proceedings of 6 May 2008. . . . . . . 2.17, 3.61, 3.97, 5.92, 6.147, 6.152–6.154, 6.156, 6.157 Libananco Holdings Co. Ltd. v Turkey, ICSID Case No. ARB/06/8, Award (2 Sep. 2011)������ 4.58, 6.132

xx

Table of Cases Norman Gabay v Islamic Republic of Iran, Case No. 771, Award (10 July 1991), 27 Iran-US C.T.R. (1992)������������������������������������������������������������������������������������������������������������������������3.94 Philip Morris Brands Sàrl v Uruguay, ICSID Case No. ARB/10/7�������������������������������� 5.14, 5.20, 5.25 Rompetrol Group N.V. v Romania (ICSID Case No. ARB/06/3), Decision on the Participation of a Counsel (14 January 2010)���������������������������������������������������� 3.61, 6.147, 6.154 Rusoro Mining Ltd. v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/12/5 (unpublished)������������������������������������������������������������������������������������������������������������������������5.20 Société Ouest-Africaine des Bétons Industriels (SOABI) v La République du Sénégal, ICSID Case No. ARB/82/1, Award, 9.17 (25 Feb. 1988), 2 ICSID Reports 368–9 (1988) ����������������4.91 Suez, Sociedad General de Aguas de Barcelona S.A. v Argentina, ICSID Case No. ARB/03/17, Decision on the Proposal for the Disqualification of a Member of the Arbitral Tribunal (22 Oct. 2007)����������������������������������������������������������������������������������������������������������������������5.92 Suez, Sociedad General de Aguas de Barcelona S.A. v Argentina, ICSID Case No. ARB/03/19, Decision on a Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (12 May 2008)��������������������������������������������������������������������������������������������������������5.92 Vito G. Gallo v Government of Canada, Decision on the Challenge to Mr J. Christopher Thomas QC of 14 October 2009 of the Secretary-General of ICSID��������������������������������������8.24 Wena Hotels Limited v Arab Republic of Egypt, ICSID Case No. ARB/98/4, Statement of Professor Don Wallace, Jr. (8 Dec. 2000)��������������������������������������������������������������������������������8.65 NAFTA Binational Panel Certain Solder Joint Pressure Pipe Fittings, CDA-USA-98–1904–03, 2000 WL 1125288 (NAFTA Binat Panel 3 Apr. 2000)������������������������������������������������������������������������������������������1.76 NASD Everen Securities v Collop, NASD 96–01295 (21 March 1997) ��������������������������������������������������6.132 Gray v Smith Barney, Inc., NASD 95–01185 (17 March 1997)����������������������������������������������������6.132 LOP Capital Markets Inc. v Sun Coast Capital Grp., In re, NASD 97–04049 (11 Aug. 1998)������6.132 Parsons v Kensington Wells, NASD 96–05310 (25 June 1998)����������������������������������������������������6.132 Prime Capital Services, Inc. v Bram 8 Procopio, NASD 97–01910 (Mar. 1998)���������������������������6.132 Teixeira v Hunter Int’l Secs., NASD 96–02581 (1 May 1997)������������������������������������������������������6.132 Permanent Court of International Justice Case Concerning the Factory at Chorzó (Germany v Poland), Claim for Indemnity—Merits (1928) PCIJ Series A, No. 13, para. 8; Order of 13 Sept. 1928, Permanent Court of International Justice Series A, No. 17��������������������������������������������������������������������������������������4.35 UNCITRAL CME Czech Republic B.V. v The Czech Republic, UNCITRAL (The Netherlands/Czech Republic BIT) (13 Sept. 2001)����������������������������������������������������������������������������������������������4.90 Guaracachi Am., Inc. v Bolivia, UNCITRAL, PCA Case No. 2011–17������������������������������������������5.20 Pope & Talbot v Canada, UNCITRAL/NAFTA, Decision on Confidentiality of 27 Sept. 2000����������������������������������������������������������������������������������������� 3.96–3.97, 6.134–6.136

xxi

Table of Cases UN Human Rights Committee Robinson v Jamaica, U.N. Human Rights Committee, Communication No. 223/1987, at ������������������������������������������������������������������������������������������������� 2.1, 10.3–10.4, U.N. Doc. CCPR/C/35/D/223/1987 (1989)��������������������������������������������������������������������������������3.22 World Trade Organisation Canada—Continued Suspension of Obligations in the EC—Hormones Dispute, Complaint by the EC (WT/DS321); Report of the Panel, Report of the Appellate Body, adopted 14 Nov. 2008 ������������������������������������������������������������������������������������������������������������������������4.40 European Communities—Measures Concerning Meat and Meat Products (Hormones), Complaint by Canada (WT/DS48), Complaint by the United States, 18 Aug. 1977, (WT/DS26/R/USA)����������������������������������������������������������������������������������������������������� 4.40, 4.44 United States—Import Prohibition of Certain Shrimp and Shrimp Products, 15 May 1998, WT/DS58/R ������������������������������������������������������������������������������������������������������������������������4.44

xxii

INTRODUCTION This book explores the professional obligations of primary participants in international arbitration—arbitrators, lawyers, experts, and third-party funders. Despite international arbitration’s impressive growth and obvious maturation in recent years, many unanswered questions remain about the ethical duties and professional conduct of these participants in arbitral processes. What is the source of their ethical duties? National ethical rules or laws? If so, which national rules and laws? What happens if, as is often the case, there are conflicting national rules in the same proceeding? Who would, should, or could sort out those conflicts? What specialized international ethical rules exist and are others needed? If so, what is their relationship to existing national rules and laws? Who should promulgate international ethical rules, and how should their content be derived? Who would enforce them? And finally, why does this all matter? This book does not seek to provide definitive answers to all of these questions. No single book could. In a regime as complex, varied, and rapidly evolving as international arbitration, the answers to most of these questions can only be provisional and partial. The objective in this work is instead to provide meaningful answers to the most salient questions, to propose conceptual and theoretical frameworks for addressing other remaining questions, and to challenge the international arbitration community to pursue answers.

A.  Thesis and themes The principal thesis of this book is that the international arbitration community should explicitly assume primary responsibility for ethical regulation of its participants. This is a call to ethical self-regulation. I take up the precise meaning of ‘self-regulation’ later in this introduction and more explicitly in Chapters 1 and 6. For now, the term ‘self-regulation’ can be understood to mean ethical regulation principally managed within international arbitration processes and institutions, as opposed to being managed externally by national courts and institutions, or national or sub-national bar authorities.1 The pages that follow make the case for how and why international arbitration should assume express responsibility for regulating its participants. 1.  Background and challenges International arbitration practices today present unique challenges that did not exist even a few years ago. The number of disputes has expanded dramatically. The increase in disputes has brought in new attorneys, parties, and arbitrators from diverse legal and cultural backgrounds. With this increasingly eclectic range of participants, the shared sense of what

1  ‘Self-regulation’ with respect to attorneys is generally used to denote regulation by professional organizations that are independent from political branches of government. See Fred C. Zacharias, ‘The Myth of Self-Regulation’, 93 Minn. L. Rev. 1147, 1152–53 (2009) (describing conventional definitions of self-regulation and arguing that judicial regulation is ‘external’ regulation, not a form of self-regulation).

1

Introduction constitutes proper conduct has broken down. Resulting ethical conflicts and quandaries are escalating both in frequency and impact in arbitral proceedings. These conflicts are not surprising given that many attorneys are not even certain what rules might apply to their conduct. A survey conducted by the International Bar Association (IBA) Task Force on Counsel Conduct found a rather astonishing lack of certainty among counsel about which rules govern attorney conduct in international arbitral proceedings. Of those surveyed, 63% reported that they believed they were subject to their home jurisdiction’s rules; 27% were uncertain, but followed their home rules in an abundance of caution; meanwhile, 10% either had no opinion or did not believe they were subject to their home jurisdiction’s rules.2 Approximately 56% of respondents believed that their conduct in international arbitration may also be subject to ethical rules other than those of their home jurisdiction. Finally, a total of 87% of respondents indicated that they are either never or only sometimes sure what ethical norms govern the conduct of their opposing counsel.3 Uncertainty about which rules apply revealed in the IBA study is but the surface reflection of more profound problems. In another recent survey, 68% of respondents reported that they had experienced what they believed were guerrilla tactics in international arbitration.4 Notably, the study did not define ‘guerrilla tactics’ because there is no agreement about what conduct even constitutes unethical, guerrilla tactics.5 One attorney may regard particular conduct as legitimate strategy to protect a party’s rights, while the opposing attorney or party (or members of the arbitral tribunal) may regard the same conduct as an unethical guerrilla tactic. As elaborated in Chapter 1, there are specific reasons why attorneys express uncertainty about which rules apply to them. Few national ethical codes for lawyers indicate whether they apply extraterritorially to arbitrations seated abroad, and few bar authorities expressly exert regulatory authority outside their home jurisdictions.6 Meanwhile, the laws of most jurisdictions intentionally disavow application of their ethical rules to foreign attorneys appearing in locally seated international arbitrations.7 The absence of clear regulation for counsel (and similarly for experts and third-party funders) has meant that those actors rely primarily on their own personal, nationally-derived assumptions about what constitutes proper conduct. This approach, however, raises a second common problem. Nationally-derived assumptions about what constitutes proper conduct can and do often clash with the ethical assumptions of other participants from other jurisdictions, and

2 IBA Task Force on Counsel Conduct in Arbitration Survey (Sept. 2010)  (on file with author). See also Horvath, ‘Guerrilla Tactics in Arbitration, An Ethical Battle:  Is There Need for A  Universal Code of Ethics?’ in C. Klausegger et al. (eds.) Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 297. (‘Attorneys are bound, if at all, by the code of ethics of the home State where they are licensed.’) Similarly, when it was suggested to a conference of international arbitration practitioners ‘that an advocate in a private commercial arbitration was not bound by the same duties owed by counsel to a court, the immediate (near unanimous) response was shock and indignation’. Peter C. Thomas, ‘Disqualifying Lawyers in Arbitrations: Do the Arbitrators Play Any Proper Role?’ 1 Am. Rev. Int’l Arb. 562, 563 (1990). 3  Results of study on file with author. 4  Edna Sussman and Solomon Ebere, ‘All’s Fair in Love and War—Or Is It? Reflections on Ethical Standards for Counsel in International Arbitration’, 22 Am. Rev. Int’l Arb . 612 (2011). 5  See Sussman and Ebere, ‘All’s Fair in Love and War—Or Is It?’. 6  See paras 1.61–1.68. 7  See paras 1.78–1.87.

2

Thesis and themes sometimes with prevailing practices in international arbitral proceedings. These conflicts in professional standards can produce an unfair playing field at multiple levels. Most obviously, if counsel are subject to different rules, differing standards of conduct may affect the fair conduct of arbitral proceedings. This potential imbalance is aggravated by the possibility that arbitrators may evaluate the propriety of the conduct of counsel and others appearing before them based on their own personal, nationally-derived ethical assumptions. These implicit cultural assumptions, and tribunal decision-making based on their own cultural assumptions, may not always be known to those whose conduct is being assessed. The impact of these uncertainties is augmented by the fact that international arbitration is no longer primarily confined to the resolution of commercial disputes among commercial parties. It is increasingly called on to resolve more complex disputes involving a wider range of parties, important national regulatory interests, and public policies. In response, international arbitration has developed more complex and sophisticated procedures to manage these new developments. The growth in size, range, and complexity of international arbitration raises the stakes for resolving ambiguities about professional conduct of all participants. Perhaps more importantly, the prominence of international arbitration, particularly investment arbitration, has trained the focus of various watchdog groups on the conduct of the participants in international arbitration. Special attention is focused on their professional conduct and the rules (or absence of rules) that regulate that conduct. The increased stakes and complexity are compounded by the arrival of new participants, such as third-party funders, and by the expanded role expert witnesses now play. The lack of professional regulation of experts and third-party funders has been a particular focus of attention for watchdog groups, especially in high-profile cases.8 These groups are scrutinizing the structure of the international arbitral process, and in constant search of examples of what can go wrong. The epic cautionary tale is the interlocking web of litigation and arbitration cases growing out of the activities of Chevron (previously Texaco) in Ecuador. In those cases, alleged misconduct by plaintiff and defence counsel, as well as judges, scientific experts, and apparently the third-party funder, has largely upstaged if not entirely pre-empted the underlying substantive claims.9 This book primarily focuses on the professional conduct of attorneys and arbitrators, although lessons drawn from those actors are also applied to issues relating to the conduct of experts, third-party funders, and (discursively) arbitral institutions. Even if the role of each of these participants is unique, certain common problems affect their ethical conduct in international arbitral proceedings. 2.  The need for self-regulation Back before anyone had even begun to examine globalization of the legal profession, several leading figures in international arbitration foresaw these problems. Michael Reisman 8  See, e.g., Pia Eberhardt and Cecilia Olivet, ‘Profiting from injustice: how law firms, arbitrators and financiers are fueling an investment arbitration boom’, Corporate Europe Observatory (12 Nov 2012), . 9  For an analysis of the Chevron case to explore the heightened risks for attorneys, particularly plaintiffs’ counsel, in transnational litigation, see Catherine A. Rogers, ‘When the Bad Guys are Wearing White Hats’, 1 Stan. J. Complex Lit. 487(2013).

3

Introduction identified the need for ethical rules in international arbitration in the early 1970s.10 Some years later, his call was echoed by Jan Paulsson, Detlev Vagts, and V.V. ‘Johnny’ Veeder, all of whom identified a need for ethical regulation at the international level to prevent potential negative consequences for international arbitration’s legitimacy.11 My own earlier scholarships built on the work of these early pioneers.12 Despite these works, until quite recently, many of the problems and proposed solutions were discounted, ignored, or even overtly opposed. Today, the scene has changed. In recent years, the world’s leading arbitrators, experts, organizations, and institutions have trained a laser-like attention on these issues. Today, instead of being regarded as a minor problem that can be ignored, the lack of ethical regulation is regarded as a potential crisis that can threaten the legitimacy of international arbitration.13 In his keynote address at the 2010 ICCA Congress, Doak Bishop argued for the development of a code of ethics for counsel in international arbitration, and even proposed a sample code.14 Two years later at the next ICCA Congress, then Attorney General, now Chief Justice of Singapore, Sundaresh Menon, sent shock waves through the arbitration world in his keynote address, which echoed Bishop’s

10   W. Michael Reisman, Nullity and Revision: The Review and Enforcement of International Judgments and Awards (1971) 116–17. 11   Jan Paulsson, ‘Standards of Conduct for Counsel in International Arbitration’, 3 Am. Rev. Int’l Arb. 214 (1992); Jan Paulsson, ‘Ethics, Elitism, Eligibility’, 14 J. Int’l Arb. 13 (1997); Detlev F. Vagts, ‘The International Legal Profession: A Need for More Governance?’ 90 Am. J. Int’l L. 250, 250 (1996); V.V. Veeder, ‘The 2001 Goff Lecture—The Lawyer’s Duty to Arbitrate in Good Faith’, 18:4 Arb. Int. 431 (2002); see also John Toulmin, ‘A Worldwide Common Code of Professional Ethics?’ 15 Fordham Int’l L.J. 673 (1992). 12   Catherine A.  Rogers, ‘The Vocation of International Arbitrators’, 20 Am. U.J. Int’l L. 959 (2005); Catherine A. Rogers, ‘Regulating International Arbitrators: A Functional Approach to Developing Standards of Conduct’, 41 Stan. Int’l L. Rev. 53 (2005); Catherine A. Rogers, ‘Context and Institutional Structure in Attorney Discipline: Developing an Enforcement Regime for Ethics in International Arbitration’, 39 Stan. Int’l L. Rev. 1 (2002); Catherine A. Rogers, ‘Fit and Function in Legal Ethics: Developing a Code of Attorney Conduct for International Arbitration’, 23 Mich. Int’l L.J. 341 (2002). 13   See Charles N.  Brower and Stephan W.  Schill, ‘Regulating Counsel Conduct Before International Arbitral Tribunals’ in Making Transnational Law Work in a Global Economy: Essays in Honor of Detlev Vagts (Cambridge, 2010) (‘At issue may ultimately be the legitimacy of the international arbitral system as a whole, in particular inasmuch as . . . [uniform legal ethics for counsel] operate not only retrospectively . . . but also prospectively as a mechanism of global governance.’); see also Cairns, ‘Advocacy and the Functions of Lawyers in International Arbitration’, in M.Á. Fernández-Ballesteros and D. Arias (eds.), Liber Amicorum Bernardo Cremades 291 (2010); Margaret Moses, ‘Ethics in International Arbitration: Traps for the Unwary’, 10 Loyola U. Chi. Int’l L. Rev.73, 79 (2013) (‘An international code could help provide transparency and certainty for proper attorney conduct, help level the playing field, contribute to the fairness of the procedure, and improve the confidence of the participants and the public in the arbitration process.’); Doak Bishop, Keynote Address ICCA Rio de Janeiro: ‘Advocacy and Ethics in International Arbitration’ (23–26 May 2010), 1, (‘Although there have been no catastrophes to this point, the International Arbitration system is at least subject to reasonable criticism without its own transparent Code of Ethics, and we need to ensure the future integrity and legitimacy of the system.’); see also Carolyn B. Lamm et al., ‘Has the Time Come for an ICSID Code of Ethics for Counsel?’ in Karl Sauvant (ed.), 2009–2010 Y.B. Int’l Inv. L. & Pol’y (2010) (answering the titular question in the positive); Cyrus Benson, ‘Can Professional Ethics Wait? The Need for Transparency in International Arbitration’, 3 Disp. Resol. Int’l 78, 83 (2009) (answering the titular question in the negative); Doak Bishop and Margrete Stevens, ‘Advocacy and Ethics in International Arbitration: International Code of Ethics for Lawyers Practicing Before International Arbitral Tribunals’, in Albert van den Berg (ed.), Arbitration Advocacy in Changing Times (ICCA Congress Series No. 15, 2010) 408–420; Gunther Horvath, ‘Guerrilla Tactics in Arbitration, An Ethical Battle: Is There Need for a Universal Code of Ethics?’ in C. Klausegger, P. Klein, F. Kremslehner, A. Petsche, and N. Pitkowitz (eds.), Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 297 (answering the titular question in the positive). 14  See Bishop and Stevens, ‘Advocacy and Ethics in International Arbitration’.

4

Thesis and themes calls and raised questions about the legitimacy of international arbitration in the absence of more express efforts at ethical regulation.15 These two keynote speeches in high-profile contexts amplified the discussion and debate that was already taking place in various other contexts. Debate has increasingly focused on concerns about potential consequences in the absence of clearer ethical regulation. In a regime with well-established ethical rules, when egregious misconduct occurs, it is regarded as aberrant. When the same misconduct occurs in the absence of established rules, however, it can reveal and exacerbate criticisms of a system and prompt external regulation. One striking example of what can go wrong is the fate of the US accounting industry after the Enron scandal. Before the scandal, the accounting industry was largely left alone by the US government, which trusted it to keep its own house in order as it kept the nation’s corporate accounting in order. When conflicts of interest and related misconduct by one of the largest accounting firms were determined to be an important contributing factor to the Enron collapse, however, the US Congress acted swiftly, dramatically, and with far-reaching results. It effectively eviscerated self-regulation by US accountants by imposing intrusive governmental oversight and new professional standards on US accountants.16 Across the Atlantic, the LIBOR scandal produced similar results for self-regulation in the financial industry. That scandal, which involved allegations that financial institutions were improperly manipulating the London Inter-Bank Offered Rate, prompted an effective end to the freedom financial institutions had enjoyed in setting inter-bank interest rates. The Economist speculated that the scandal could be the ‘tobacco moment’ for the ­banking ­industry—the moment at which the public lost trust in the industry and both national and ­international regulators responded to the public’s outcry.17 In reaction to the LIBOR scandal, the European Parliament held public hearings, and prosecutions resulted in large fines and custodial sentences of up to fourteen years.18 Several other regulators leapt into action, mandating new transparency reforms and hard-nosed standards for the setting of rates. The British Banker’s Association is to be stripped of its role of setting the LIBOR interest rate and instead will be replaced by a formal regulator that will oversee

15  See Sudaresh Menon, Attorney General of Singapore, Keynote Address ICCA Singapore, ‘International Arbitration: The Coming of a New Age for Asia (and Elsewhere)’ (15 June 2012), . See also Sudaresh Menon, London School of Economics 4th Arbitration Debate: ‘Is Self-Regulation of International Arbitration an Illusion’ (9 May 2013), , and Sudaresh Menon, Attorney General of Singapore, London Queen Mary School of International Commercial Arbitration, ‘Seminar on Contemporary Challenges in International Arbitration’ (27 September 2012), . 16  It also enacted reforms that made many foreign accounting firms subject to US regulatory oversight and to US accounting standards. These measures were so ‘distasteful’ and the standards imposed so onerous, the EU responded with contrary legislation that effectively eliminated the prospect of much-needed universal accounting standards in the foreseeable future. Lauren Gardner, ‘Move from GAAP to IFRS Could Spell Big Changes for Companies Using LIFO’, 4 Acct. Pol’y & Prac. Rpt. 803, 804 (2008), 4 APPR 803 (BNA Tax and Accounting Center). 17  See ‘Banksters: How Britain’s rate-fixing scandal might spread—and what to do about it’, The Economist (7 July 2012), . 18  Arlene McCarthy, ‘Banks and Regulators to Be Called to Account on Libor Scandal’ (23 July 2012), .

5

Introduction the rate that is used to set prices on £300 trillion of financial products from New York to Tokyo.19 Perhaps most telling, the LIBOR reforms are regarded as only a first step in a much more systematic overhaul of financial industry regulation in the UK and other jurisdictions, from Japan to the EU, or even to the United States.20 If these scenarios seem unlikely to repeat in international arbitration, consider what happened when a local paper in California ran ‘a series of articles featuring horror stories about the inequities of [domestic consumer] arbitration’, including charges of ‘partiality by repeat player arbitrators hoping to be selected again’.21 In reaction to these reports, the California legislature passed aggressive new legislation that included new rules substantially expanding arbitrator disclosure requirements, providing mechanisms for regulating arbitrators and, more controversially, potentially increasing the bases for disqualifying arbitrators.22 This legislation was in reaction to, and is aimed primarily at, domestic arbitration. It has, however, raised concerns within the international arbitration community that other legislatures, including the US Congress, might follow California’s lead.23 If national actors were to become active in regulation of professional conduct in international arbitration, they could undermine efforts to promote neutral, effective, and efficient decision-making. National bar authorities, courts, and legislatures are neither equipped nor positioned to effectively assess the nature of professional conduct and related needs for ethical regulation in international arbitration practice. They are far removed from international arbitral proceedings in every sense. National ethical rules and enforcement regimes are firmly entrenched in cultural expectations and national procedural traditions. International arbitration, by contrast, has special procedures designed to transcend national legal cultures and procedural traditions. It has a history of effective procedural experimentalism and innovation.24 This innovation was necessitated by its multi-cultural milieu, facilitated by its flexible format, and cultivated by the pragmatism of expert arbitrators. Today, most international arbitrations are governed by hybrid and innovative procedures that defy categorization as rigidly adherent to the traditions of any single legal culture. Appropriate ethical regulation for various actors is needed to ensure effective compliance with these procedures and the procedural fairness that they were designed to ensure. More reliable ethical regulation will also ensure that, when bad behaviour does occur, it is viewed as an aberration in an otherwise healthy system, instead a symptom of lurking systemic 19  Jill Treanor, ‘British Banker’s Association to be Stripped of Libor Rate-setting Role’, The Guardian (25 September 2012), . 20  Harry Wilson, ‘Libor Reform is “First Step” to City Overhaul’, The Telegraph (28 September 2012), . 21  Ruth V. Glick, ‘California Arbitration Reform: The Aftermath’, 38 U.S.F. L. Rev. 119, 120 (2003). 22  Ruth V. Glick, ‘Should California’s Ethics Rules Be Adopted Nationwide?: No! They Are Overbroad and Likely to Discourage Use of Arbitration’, Disp. Resol. Mag., Fall (2002), 13; see also ‘Judicial Council of California Adopts Ethics Standards for Private Arbitrators’, 13 World Arb. & Mediation Rep. 176 (2002) (arguing that the volume of information that must be disclosed under California’s new standards ‘may be too burdensome’ and could ‘be used too readily’ to disqualify arbitrators). 23  See Cal. Civ. Proc. Code § 1281.85, 1281.9, 1281.91 (West 2013) (US) (outlining arbitrator ethical and neutrality standards). 24  See John R. Crook, ‘Fact-Finding in the Fog: Determining the Facts of Upheavals and Wars in Inter-State Disputes’, in Catherine A. Rogers and Roger P. Alford (eds.), The Future of Investment Arbitration (2009) 313.

6

Thesis and themes pathologies that require external regulation. In this respect, ‘self-regulation’, as proposed in this book, is an effort to formalize, systemize, and strengthen piecemeal forms of internal regulation that already exist in international arbitration. 3.  Existing predicates for self-regulation In many respects, while the name is new, the phenomenon of self-regulation is not new in international arbitration. Modern developments, particularly with regard to arbitrators and more recently with regard to attorneys, demonstrate that self-regulation is already organically embedded and actively implemented in various forms in international arbitration. The challenge now is to accelerate those trends and approach reforms more systematically. a. Arbitrators As explored in greater detail in Chapter 2 and later in Chapter 6, the international arbitration community has already developed the primary sources and mechanisms for professional regulation for arbitrators. For example, the standards that provide the most important guidance for arbitrator disclosure and disqualification are the IBA’s Guidelines on Conflicts of Interest for International Arbitrators (IBA Conflict Guidelines or Guidelines).The IBA Conflict Guidelines work in tandem with standards and procedures in arbitral rules that govern arbitrator appointment and challenge. Both the IBA Conflict Guidelines and arbitral institution rules were developed primarily by private organizations and institutions. National courts review challenges to awards (and sometimes arbitrators) under the standards in the New York Convention and national statutory law. They may evaluate the same arbitrator conduct as arbitral institutions, but they do so as a last resort. In reviewing awards, they generally only refuse enforcement when the alleged misconduct undermines the fundamental fairness of the award. Under this approach, national courts’ review of awards provides a safety net for the outcomes of arbitral procedures, but the standards and enforcement procedures that primarily regulate arbitrator conduct were developed by arbitration specialists at an international level, and are embedded in arbitral proceedings. This allocation of primary competence to the arbitration community, and back-up functions to national courts, suggests self-regulation is already a reality for international arbitrators. Some essential challenges, however, remain unresolved. As explored in greater detail in Chapters  2, 6, 8, and 9, there are significant ambiguities, both within international arbitration’s self-regulatory mechanisms and among national courts. The most significant ambiguity is with regard to the meaning of arbitrators’ duty of ‘impartiality’, particularly as it applies to party-appointed arbitrators and so-called ‘issue conflicts’. There are also conflicting guidelines and practices within the arbitration community about the propriety of pre-appointment communications with arbitrators, as well as procedural and informational asymmetries that can undermine the fairness of arbitrator selection and appointment. If these ambiguities are not resolved definitively by the international arbitration community, national courts or legislatures may step in to resolve them. Expressly embracing existing de facto forms of self-regulation can ensure that these and other sensitive issues are resolved in a manner best-suited to the proper functioning of international arbitration. b. Counsel Although not as well developed as self-regulatory mechanisms for arbitrators, some seeds of self-regulation also exist for counsel and experts in international arbitration. While the 7

Introduction overriding presumption is that national ethical rules apply in international arbitration, conflicts among them have forced development of some ad hoc rules to resolve conflicts. For example, as explored in Chapter 3, pre-testimonial communication with witnesses is now generally accepted as proper conduct in international arbitration, even for attorneys licensed in national legal systems that prohibit such communications. This apparent harmonization and evolution, however, raises as many questions as it resolves. As analysed in more detail in Chapter 3, despite new assumptions that some degree of pre-testimonial communication with witnesses is regarded as proper, some arbitrators still regard certain forms of pre-testimonial communication as ‘flagrant misbehaviour’.25 The precise line at which acceptable communication ends and ‘flagrant misbehaviour’ begins is not specified in any binding rules, nor necessarily agreed upon among international arbitration practitioners despite recent efforts to draw that line. The line effectively moves around, depending on the type of arbitrators, parties, and counsel in a particular proceeding. Despite ambiguity about where the line is, the consequences can be serious if a tribunal discounts or disbelieves a witness or an attorney based on perceived overstepping of that line. Another sign of the intrinsic move toward self-regulation is that arbitrators are being called upon with greater frequency to exercise regulatory power over attorney and expert conduct in arbitral proceedings. Arbitrators already exercise this power through their rulings on procedural and evidentiary issues, through negative inferences and more generally in their weighing of evidence, and in their awarding of costs and expenses of legal representation.26 With only a few recent exceptions, however, these forms of enforcement impose unwritten rules through informal, implicit, and indirect means. Some of these mechanisms may also be misdirected—they generally focus on parties, not their counsel (or experts), who may actually be responsible for the alleged misconduct. In light of this background, the challenge with counsel ethics is to legitimize and formalize tribunals’ regulatory function regarding counsel conduct and tie it to clearly articulated, internationally harmonized ethical rules. The transition contemplated is an extended process. It is a long-term goal, not a quick fix. The first steps are already underway and demonstrate the international arbitration community’s awareness of the problem and reflexive impulse to resolve it. Various individual arbitration specialists have made ad hoc proposals.27 Meanwhile, several investment arbitral tribunals have formally ruled that they have the inherent or implied power to regulate attorney conduct as part of their power to control proceedings.28 Numerous conferences and publications have joined the chorus calling for clearer standards 25  See Hans Van Houtte, ‘Counsel-Witness Relations and Professional Misconduct in Civil Law Systems’, 19 Arb. Int’l 457, 461 (2003). 26  See paras 6.132–6.136. 27  For example, Cyrus Benson drafted a checklist that he proposes be considered by arbitrators at the commencement of proceedings, and Doak Bishop and Margrete Stevens drafted a proposed code that can be adopted by arbitrators to formally bind counsel in arbitral proceedings. Cyrus Benson, ‘Can Professional Ethics Wait? The Need for Transparency in International Arbitration’, 3 Disp. Resol. Int’l 78, 83 (2009). 28  Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling regarding the participation of David Mildon QC in further stages of the proceedings of 6 May 2008, .This case is discussed in Chapter 3.

8

Terminology and formal mechanisms for enforcement.29 These various initiatives have prompted action by the International Bar Association, which appointed a Task Force on Counsel Conduct in 2007. The Task Force published the IBA Guidelines on Conduct of Party Representation in International Arbitration in 2012. While their status and acceptance remains somewhat uncertain, they have already prompted related efforts by some arbitral institutions. New arbitral rules are specifically addressing issues of misconduct and potentially expanding tribunal powers in controlling the conduct of participants in arbitral proceedings. These various efforts are still midstream and ardently resisted by some prominent critics. Chapters 3 and 6 examine these developments and their implications for self-regulation in international arbitration.

B. Terminology The cross-cultural, inter-disciplinary analysis in this book necessarily implicates a number of terms that can have specialized meanings in different contexts. An overview of those terms is useful here. As already noted, and developed further in Chapter 6, a term central to the primary thesis of this book is ‘self-regulation’. It is used to refer to a regime in which the international arbitration community expressly exercises primary responsibility for developing ethical rules to govern the conduct of its participants, and operates as the primary enforcer of those rules. The ‘self ’ in ‘self-regulation’ does not imply that arbitrators would regulate arbitrators and counsel regulate counsel. Instead, it refers to the international arbitration community regulating participants within the processes and through mechanisms that exist within international arbitration’s legal framework. In this respect, as developed in greater detail in Chapter 6, the term ‘regulation’ does not connote formal governmentally imposed rules and procedures. It also does not connote, as with national professional regulation of attorney ethics, power exercised by bar authorities imposing disciplinary sanctions, such as fines, suspension, or revocation of bar membership or licensure. These more traditional views on ‘regulation’ and ‘self-regulation’ are outdated and unhelpful in understanding how professional regulation actually works and how it should work in international arbitration. This broader conception of the term ‘regulation’ encompasses existing practices—such as arbitral institutions’ rulings on arbitrator challenges and arbitrators’ rulings on costs and 29 Panel, Ethics in International Arbitration, New Developments in International Arbitration, Annual Meeting of the College of Commercial Arbitrators, New York, 27 October 2012; Panel, International Legal Ethics, ASIL Annual Conference, 31 March 2012; Co-Chair and Panel Moderator, ITA-CCB Americas Workshop: Confronting Ethical Issues in International Arbitration, Bogotá, Colombia, 14–15 October 2010; Panel Guerilla Tactics in International Arbitration: Cultural Differences and Ethical Solutions, Arbitration Days, Vienna, Austria, 13 February 2010; Panel, The Ethics of International Investment Arbitrators, British Institute of International and Comparative Law, Thirteenth Investment Treaty Forum Public Conference, London, 11 September 2009; Confronting Ethical Issues in International Arbitration, Institute of Transnational Arbitration Annual Workshop, Dallas, Texas, 18 June 2009; Ethics Panel, Leading Arbitrators in International Arbitration, Vienna, Austria, 6 April 2009; Sheila Block, Ethics in International Proceedings, International Litigation News of the International Bar Association, London, October 2004; Kevin O’Gorman, Ethical Pitfalls in International Practice: Arbitration, State Bar of Texas International Law Section 23rd Annual Institute, 25 February 2011; John M. Townsend, Clash and Convergence on Ethical Issues in International Arbitration, University of Miami Inter-American Law Review Symposium on International Arbitration, 2 April 2004.

9

Introduction fees that may indirectly take into account counsel misconduct. These practices, viewed as forms of self-regulation in varying degrees of evolution, are consistent with examples in other institutions that regulate or are part of self-regulatory regimes in national legal systems. In addition to ‘regulation’, a few other terms require clarification. Specifically, the terms ‘ethics’ or ‘ethical rules’ are difficult to define in a multi-cultural context. Even among academics who study ethics within individual national systems, there is extensive debate about the essential nature of ethical rules and their relationship to individual morality.30 In a transnational context, definitional issues are even more complex. Conduct that is regulated by ethical rules in some legal systems may be treated exclusively as a matter of procedure, as customary practice, as client relations, or as strategic decision-making in other systems. For other types of conduct, national ethical codes sometimes overlap with, and other times cordon off, conduct that is considered a criminal violation. Once conduct can also be labelled criminal, the professional implications of that conduct may seem less central such that only criminal remedies should be pursued. For these reasons, in discussions of national and comparative ethics, this book generally uses the terms ‘ethics’ or ‘ethical norms’ to include not only those ethical principles that have been distilled into professional codes, but also those norms that are incorporated into procedural rules, other legal rules (such as criminal and malpractice rules), as well as custom or practice norms that are generally recognized, but not formally recorded.31 More generic terms such as ‘conduct norms’ or ‘professional standards’ might avoid some of the terminological difficulties that arise with cross-cultural comparisons of ethics. At a practical level, however, framing counsel ethics in international arbitration as simply a matter of ‘conduct norms’ or ‘practice standards’ raises obstacles for self-regulation. Amorphous, non-binding conduct norms or professional standards are unlikely to be accepted by national bar authorities as legitimate substitutes for national ethical rules that might otherwise control. As explored in Chapters 1, 3, and 6, many national legal systems seem poised to permit the ethical rules of a foreign or international tribunal to displace their own rules for conduct before that tribunal.32 National bar authorities and courts will not defer to international arbitration’s attempts at self-regulation if the regime looks more like an escape hatch from national ethical rules than a serious effort at meaningful self-regulation. This analysis is not simply a matter of terminology. It is also a matter of formal choice-oflaw analysis. Under some national ethical codes, such as Model Rule 8.5 in the United States, local ethical rules can be displaced by another body of ethical rules, for example, the rules of a tribunal before which an attorney appears. Such national choice-of-law rules will not apply, however, if the tribunal has no ethical rules of its own, as is currently the case with international arbitration. Vague ‘conduct norms’ and even optional guidelines, such as those promulgated by the IBA, would not seem to alter this outcome.

30  For an overview of the debate on the nature of legal ethics, see Stephen Gillers, ‘Twenty Years of Legal Ethics: Past, Present, and Future’, 20 Geo. J. Legal Ethics 321, 322–23 (2007). 31  See Fred C. Zacharias, ‘Reconceptualizing Ethical Roles’, 65 Geo. Wash. L. Rev. 169, 205 (1997). 32  See paras 1.67–1.69; 3.24–3.29; 6.159–6.162.

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Terminology In addition to choice-of-law concerns, this book generally uses the term ‘ethics’ as opposed to ‘professional conduct’ because the more generic terms obscure what is really at stake. International arbitration claims to provide modern, sophisticated, fair, and legitimate adjudication. The ethical conduct of its participants is an implicit part of that claim. Asserting that attorneys must behave ethically when appearing in national courts, but need only conform to ‘conduct norms’ or ‘professional standards’ in international arbitration, suggests that international arbitration is not about justice or true adjudication, but is instead simply a ‘bastard remedy’33 and a lesser substitute for national court adjudication. Corollary to the thesis that international arbitration should self-regulate is a theory of international arbitration, which runs throughout the book and is specifically developed in Chapter 9. That theory posits that international arbitration is not simply resolving disputes between private parties, but in most instances providing an adjudicatory function. In referring to the content of national ethical codes, the term ‘rules’ is generally used, even though the provisions of some codes are drafted more as general standards than as precise rules.34 There are well-worn debates about the distinctions between ‘rules’ versus ‘standards’ in various fields, particularly in ethics. It is often observed that US, English, Canadian, and Australian ethical codes tend to contain legalistic rules, with precise language and requirements. Codes in most other countries, by contrast, impose more generalized obligations, which are articulated in more open-ended terms and might more accurately be described as standards. In this sense, the distinction between rules and standards connotes a level of detail and rigidity in the content of the norms. In a distinct but related vein, ‘standards’ are often distinguished from ‘rules’ based on the binding nature of rules versus the advisory nature of standards or guidelines. In using the term rules, I do not imply that ethical rules for international arbitration should be excruciatingly detailed, or cannot be flexible or supple enough to adapt to various interpretations and applications.35 In discussing the ultimate regulatory objectives for international arbitration, the term ‘rules’ rather than ‘standards’ is used because the larger thesis of the book is that international arbitration should ultimately be aiming for ethical regulation that is as binding and effective as the national ethical regulation it seeks to replace. One of the most fundamental terms, ‘international arbitration’, also requires some clarification. ‘International arbitration’ is often used to connote a model that is presumed to typify most cases. This model is epitomized by large, commercial disputes involving relatively

33  Thomas E. Carbonneau, ‘Arbitral Justice: The Demise of Due Process in American Law’, 70 Tul. L. Rev. 1945, 1947 (1996). Judicial and scholarly critics of arbitration remain, although the focus of modern criticisms is more on the protection of parties’ procedural rights and arbitrator adherence to the rule of law. See, e.g., Leo Kanowitz, ‘Alternative Dispute Resolution and the Public Interest: The Arbitration Experience’, 38 Hastings L.J. 239, 255 (1987) (‘[C]‌ourts have recognized and continue to recognize that arbitration may be inferior to traditional judicial dispute resolution in the quality of justice it accords to individual disputants as well as in its ability to protect public interests.’); Stroh Container Co. v Delphi Indus., 783 F.2d 743, 751 n.12 (8th Cir. 1986) (‘[T]he arbitration system is an inferior system of justice, structured without due process, rules of evidence, accountability of judgment and rules of law.’). 34  Mary C.  Daly, ‘The Dichotomy Between Standards and Rules:  A  New Way of Understanding the Differences in Perceptions of Lawyer Codes of Conduct by US and Foreign Lawyers’, 32 Vand. J. Transnat’l L. 1117, 1150 (1999). 35  In fact, the Functional Thesis developed in Chapter 7 expressly argues for the need for flexibility so that ethical rules can be tailored to the various procedural arrangements in different arbitral contexts. See paras 7.103–7.105.

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Introduction sophisticated parties, who usually select national law to govern their disputes. In fact, there are a wide range of models, including some that vary considerably from this standard model. The most obvious distinct sub-category is investment arbitration, but others include arbitration tailored for the maritime, construction, reinsurance, and commodities industries. While some analysis in this volume explicitly accounts for these variances, it does not attempt to systematically differentiate among them for every issue. In a similar vein, although parties are not required to be represented by licensed attorneys in international arbitration, in the conventional model of international arbitration, parties inevitably retain attorneys to represent them. The need for legally trained professional representation is part and parcel of the larger trend in international arbitration toward more formal, law-bound adjudicatory processes, which require trained lawyers.36 Moreover, the most sensitive and complex regulatory issues arise when nationally licensed attorneys appear in international arbitration. For this reason, this work references only attorneys and counsel, even if any regulatory regime ultimately adopted would also have to apply to representatives who were not attorneys.

C. Methodology Perhaps in a nod to the improvisational and pragmatic nature of international arbitration itself, the arguments in this book are not tethered to formal legal doctrine. Instead, they borrow, often only implicitly, from various fields and methodologies. Comparative analysis of national ethical rules necessarily invokes the methodologies of comparative law, and analysis of the overlap of national and international regimes benefits of notions borrowed from legal pluralism. One significant methodological limitation in the book’s comparative analysis is that it is usually framed in the familiar distinctions between ‘common law’ and ‘civil law’. These terms refer not to specific systems, but are instead used as ideal types.37 While these ideal types can be useful heuristics, they also pose important limitations. A more profound limitation is that those common law and civil law jurisdictions that are examined in detail were generally used primarily because materials are available in sources published in English. While English is the dominant language in international arbitration, for some of the jurisdictions whose importance in international arbitration is new and emerging, few if any scholarly sources are available that analyse the nuances of their national ethical regulation. Future editions of this book will hopefully remedy that deficiency with primary comparative research to examine a wider range of jurisdictions. In addition to comparative methodologies, this book also follows in the tradition of sociological accounts of international arbitration. Earlier sociological works have provided an essential basis for understanding the actual practice and evolution of the field.38 Outside of international arbitration, sociological analysis of the legal profession has also been essential for delineating the function and developments of legal institutions and the legal profession, particularly with respect to trends in globalization. In addition to existing sociological   See paras 1.35–1.38; 9.50–9.53.   See Mirjan R. Damaška, The Faces of Justice and State Authority: A Comparative Approach to the Legal Process (1986) 130 and n. 60. 38  See Yves Dezalay and Bryant Garth, Dealing in Virtue: International Arbitration and the Construction of a Transnational Legal Order (1996). 36 37

12

Overview of the argument research, some arguments in this volume draw from anecdotal accounts of developments in the field. In formal legal systems, anecdotal evidence carries little or no weight. In international arbitration, where even survey research faces significant methodological challenges, anecdotal accounts can capture insights of essential features that may elude detection in more formal studies. As with more primary and systematic comparative law research, these anecdotal accounts may also be a basis for additional research for future editions. This book also borrows from other fields. Law and economics and institutional analysis invoked in national debates over regulatory efficiency provide a starting point for similar analysis in this work. In developing an account of self-regulation in international arbitration, I rely on political science39 and ‘New Governance’ accounts regarding the rise of private entities in global regulation.40 In most instances, reliance on these theories and methodologies is implicit and their insights and approaches are blended in an integrated analysis.

D.  Overview of the argument Against the backdrop summary of the book’s thesis, themes, terminology and methodology, it is useful to provide a general outline of how the book proceeds. It is divided into two Parts, each of which takes up distinct aspects regarding the challenges of implementing selfregulating regimes. The first five chapters in Part I provide a systematic assessment of the nature, scope, and causes of the ethical quandaries that routinely arise in international arbitration. Chapter 1 provides a general historical background, both within international arbitration and with respect to a larger backdrop of the globalization trends of the legal profession. Chapters 2, 3, 4, and 5 take up, respectively, ethical issues relating to arbitrators, counsel, experts, and third-party funders. Part II contextualizes these problems in theoretical frameworks and establishes the general parameters for implementing an effective ethical regulatory regime for international arbitration. Chapter 6 builds on existing theories of regulation in global contexts to develop a working definition of regulation as something other than top-down government control. Based on this definition, it traces the evolution of ethical regulation of arbitrators to demonstrate that, in keeping with this definition, it occurred primarily at the international level and through private institutions. It then uses the model that has emerged with regard to international arbitrators to propose solutions to redress the problems raised about counsel regulation in Chapter 3. Chapter  7 introduces the Functional Theory of legal ethics. At a descriptive level, the Functional Theory provides a conceptual analysis of why different national systems have developed different ethical rules for counsel and arbitrators. At a prescriptive level, the Functional Theory is a tool for defining and developing the content of ethical norms to address the challenges identified in Part I. Applying the Functional Theory, in Chapter 8, I develop a more robust and meaningful definition of arbitrators’ duty of impartiality, which is then used to analyse some of the most important contemporary debates, including special concerns about potential biases among investment arbitrators and recent calls to abolish unilaterally appointed party-nominated arbitrators. Chapter 9 provides a theory for reconciling 39  Tim Büthe and Walter Mattli, The New Global Rulers: The Privatization of Regulation in the World Economy (2011). 40  See paras 6.17–6.19.

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Introduction existing debates about the status of international arbitrators as either service providers or justice providers. Finally, Chapter 10 concludes with a forward-looking assessment of the future of professional regulation in international arbitration, situating that analysis within trends toward globalization of the legal profession more generally.

E. Conclusion The proposals in this book are far-reaching and ambitious. Self-regulation is not for the faint-hearted. Achieving effective self-regulation in international arbitration will require serious and concerted effort over a long period of time. It will require coordination by and among arbitrators, arbitral institutions, and practitioners, and buy-in by clients and national bar authorities. It will also require overcoming resistance from several corners. Many international arbitration practitioners resist the view that conflicting ethical rules cause any meaningful problems. Others may discount the potential risk of interference on ethical issues from domestic institutions. Still others reject more generally any efforts to develop ethical rules and enforcement mechanisms for international arbitration on the ground that there are already too many rules, and arbitral processes should remain maximally flexible. Ultimately, arguments for and against more clear and effective self-regulation should be evaluated not only on their own terms, but also in light of the personal and perhaps even self-interested perspectives of those making the arguments. Who will most benefit and who will lose from existing conflicts and ambiguities? Who will benefit and who will lose from development of effective self-regulation? The potential costs and benefits of self-regulation are further assessed in Chapter 10. Critics notwithstanding, tackling ethical self-regulation presents a unique opportunity for international arbitration. International arbitration does not have the majestic buildings, the black robes, bailiffs, and marshals that promote a sense of legitimacy and ensure compliance with national court decisions.41 Instead of these tangible symbols and resources, international arbitration relies in substantial part on the integrity and professional conduct of its founders and of its modern custodians—the arbitrators, counsel, experts, and administrators of arbitral institutions—to inspire confidence and ensure its legitimacy. These individuals have built and sustained the legal frameworks, practices, and procedures on which international arbitration operates. As described in more detail in Chapter 1, international arbitration is in a pivotal moment in its history. Taking up the call for ethical self-regulation provides an opportunity to develop collective understanding about what constitutes proper and improper conduct, an understanding that transcends national legal cultures. The process of clarifying and formalizing ethical self-regulation will give international arbitration an opportunity to take stock of where it has come from and where it is going. It is an opportunity to reaffirm the core basis of its legitimacy—the professional reputation and conduct of the actors who, more than the rules, the institutions, or legal frameworks, are the heart of international arbitration.

41  Michael Richard Dimino, Sr., ‘Counter-Majoritarian Power and Judges’ Political Speech’, 58 Fla. L. Rev. 53, 63 (2006) (‘Public acquiescence in judicial decisions is possible only where courts hold legitimacy and design countless symbolic references—from the Justices’ robes to the marble palace from where they issue their pronouncements—to inspire awe and unquestioning obedience from the public.’).

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Part I MAPPING THE TERRAIN

1 FROM AN INVISIBLE COLLEGE TO AN ETHICAL NO -MAN’S LAND [T]‌he professional community of international lawyers . . . though dispersed throughout the world and engaged in diverse occupations, constitutes a kind of invisible college dedicated to a common intellectual enterprise. Oscar Schachter

No Man’s Land is an eerie sight At early dawn in the pale gray light. Never a house and never a hedge In No Man’s Land from edge to edge.

James H. Knight-Adkin*

International arbitration was founded by members of what Oscar Schachter called the 1.01 ‘Invisible College of International Lawyers’.1 Schachter argued that, even though international lawyers were ostensibly performing ordinary legal services on behalf of individual clients, they were effectively engaged in a legislative function, contributing to creation of a global legal order.2 Although Schachter did not single out the founders of modern international arbitration specifically, he was undoubtedly describing them. Like other members of Schachter’s Invisible College, those who made international arbitra- 1.02 tion what it is today shared a common intellectual enterprise. They also shared a professional ethos that was preoccupied with transcendent principles of justice.3 As Schachter theorized, they aimed at constructing a global legal order. Through their advocacy and service as arbitrators, their scholarship, their drafting of essential treaties,4 and their lobbying of national governments, they established international arbitration as a feasible and reliable dispute   No Man’s Land, in George Herbert Clarke (ed.), A Treasury of War Poetry (1917).   Oscar Schachter, ‘The Invisible College of International Lawyers’, 72 Nw. U. L. Rev. 217 (1977). 2  See Schachter, ‘The Invisible College of International Lawyers’, 223–6. 3  See Schachter, ‘The Invisible College of International Lawyers’, 225–6. Yves Dezalay and Bryant Garth similarly identified how attorneys and arbitrators in international arbitration operate as ‘moral entrepreneurs.’ Yves Dezalay and Bryant G. Garth, ‘Merchants of Law as Moral Entrepreneurs: Constructing International Justice from the Competition for Transnational Business Disputes,’ 29 Law & Soc’y Rev. 27, 35 (1995). 4  Pieter Sanders may be considered the dean of the Invisible College’s school of international arbitration. Famously, on one weekend in May 1958, Sanders typed on a small portable typewriter at his father-in-law’s house what would later be ratified as the United Nations Conference on International Commercial Arbitration. See Pieter Sanders, ‘The History of the New York Convention’, in Albert Jan van den Berg (ed.), Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention (ICCA Congress Series No. 9, 1999) 11–14. * 1

17

From an Invisible College to an Ethical No-Man’s Land resolution mechanism. They shaped its legal framework and the contours of its procedures that remain today. 1.03 In those early stages, international arbitration practitioners and arbitrators had shared

understandings about various issues, including tacit understandings about what constituted proper ethical conduct in arbitral proceedings. Several recent trends, both within international arbitration and more generally as part of globalization of the legal profession, have broken down these shared understandings. The result is that today, instead of being constituents of an Invisible College, those participating in international arbitration dwell in an ethical no-man’s land.

1.04 A ‘no-man’s land’ is a space between the formally occupied territories of two warring sover-

eigns.5 In the absence of a governing sovereign, booby traps, land mines, snipers, and tangled barbed wire determine how and when soldiers manoeuvre in that space. Attacks from both sides are constant. Most importantly, the uncertain political status of a no-man’s land means that it is unclear what rules or laws apply because the warring sovereigns each claim legal dominion. Perhaps this last feature best captures why makes professional conduct in international arbitration an ethical no-man’s land.

1.05 The ethical abyss is most evident with respect to counsel. Even if their conduct is central to

arbitral proceedings, no one seems to know what, if any, ethical rules apply to attorneys in international arbitral proceedings. Consider, for example, the range of possibly applicable ethical rules that might apply to a German attorney, who has an LL.M. from a US law school and is a member of the New York Bar, and is representing a Japanese client in an arbitration seated in Switzerland that is governed by French substantive law against an Austrian counterparty. If the reader is uncertain about which ethical rules apply, arbitration experts do not fare much better.

1.06 A recent survey by the International Bar Association (IBA) Task Force on Counsel Conduct

in Arbitration confirmed the general confusion about what rules would apply. Of those surveyed, 63% reported that they believed that they were subject to their home jurisdiction’s rules; 27% were uncertain, but followed their home rules in an abundance of caution. Meanwhile, 10% either had no opinion or did not believe they were subject to their home jurisdiction’s rules.6 Approximately 56% of respondents believed that their conduct in international arbitration may also be subject to ethical rules other than those of their home jurisdiction. Finally, a total of 87% of respondents indicated that they are either never or only sometimes sure what ethical norms govern the conduct of their opposing counsel.7 5  The earlier etymology of the term ‘no-man’s land’ is a little more gruesome. It was first used for a wasteland outside London where the rotting bodies of hanged, impaled, and beheaded criminals were left as a warning to potential lawbreakers. G.J. Aungier (ed.), Chroniques de London: depuis l’an 44 Hen. III. jusqu’à l’an 17 Edw. III. (Camden Soc, 1844) 56. This area came to be known as no-man’s land since no one would seek to claim this land for ownership. Later it obtained its modern connotation. 6  IBA Task Force on Counsel Conduct in Arbitration Survey (Sept. 2010). See also Günther J. Horvath, ‘Guerrilla Tactics in Arbitration, an Ethical Battle: Is There Need for a Universal Code of Ethics?’ in C. Klausegger et al. (eds.), Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 297 (‘Attorneys are bound, if at all, by the code of ethics of the home State where they are licensed.’). Similarly, when it was suggested to a conference of international arbitration practitioners ‘that an advocate in a private commercial arbitration was not bound by the same duties owed by counsel to a court, the immediate (near unanimous) response was shock and indignation’. Peter C. Thomas, ‘Disqualifying Lawyers in Arbitrations: Do the Arbitrators Play Any Proper Role?’ 1 Am. Rev. Int’l Arb. 562, 563 (1990). 7  Results of study on file with author.

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From an Invisible College to an Ethical No-Man’s Land As with a real no-man’s land, instead of liberating participants from ethical regulation, these 1.07 ambiguities foster conflict and confusion, create traps for the unwary, and provide opportunities for mischief by the unscrupulous. It is perhaps no surprise, therefore, that there are numerous reports of increased incidents of so-called ‘guerrilla tactics’ in international arbitral proceedings. Although there is no universal definition, ‘guerrilla tactics’ generally refer to intentional ethical abuses that are intended to delay or sabotage arbitral proceedings in order to gain an unfair advantage.8 In a recent survey, 68% of respondents reported having themselves experienced guerrilla tactics.9 Notably, the authors of the survey did not define ‘guerrilla tactics’ because—with no consensus about what constitutes proper ethical conduct—one attorney or party’s guerrilla tactic is another party or attorney’s legitimate strategy or even procedural right. With international arbitrators, the problem is not so much about what rules or standards 1.08 apply, or about rampant misbehaviour. The international arbitration community has done a commendable job of developing increasingly clear and transparent standards, and increasingly effective procedures for enforcing them. Nevertheless, important questions remain in certain areas, such as with respect to the nature of impartiality obligations of party-appointed arbitrators, the nature of arbitrators’ vocation as service providers (or something more), the role of arbitral institutions in monitoring arbitrators, the effect of so-called ‘issue conflicts’, and perceived inequities and lack of transparency in the selection process. With other participants, such as experts and third-party funders, issues about their profes- 1.09 sional conduct are largely uncharted territory. The questions are new and, until now, largely unexplored.10 Anecdotal reports, however, suggest that ambiguities about what standards or rules apply, and hence what constitutes appropriate conduct, are an increasingly important concern. The overall thesis of the book is that professional regulation of these various participants 1.10 must be endogenous, not exogenous, to international arbitration. This is an express call to self-regulation. While the term ‘self-regulation’ is new, the dynamic of self-regulation is well worn into the very fabric of international arbitration. As explored more specifically in Chapter 6, international arbitration operates largely on assumptions of its ability and need to self-regulate. Its processes exist largely independent of national legal systems, unregimented by national procedural rules, and free from the confines of national legal cultures. In this respect, international arbitration has always been, and continues to be, largely self-regulating, including with respect to the conduct of participants. To date, only arbitrators have been effectively subject to self-regulation. This book proposes that international arbitration extend the tradition of self-regulation expressly and intentionally to the ethical conduct of all its participants. Self-regulation will render their professional obligations more clear,

8  For various definitions of ‘guerrilla tactics’, see  Stephan Wilske, ‘Arbitration Guerrillas at the Gate: Preserving the Civility of Arbitral Proceedings when the Going Gets (Extremely) Tough’, in Klausegger et al. (eds.), Austrian Yearbook on International Arbitration, 315–19; Horvath, ‘Guerrilla Tactics in Arbitration, an Ethical Battle: Is There Need for a Universal Code of Ethics?’ in Klausegger et al. (eds.), Austrian Yearbook on International Arbitration, 297; Abba Kolo, ‘Witness Intimidation, Tampering and Other Related Abuses of Process in Investment Arbitration: Possible Remedies Available to the Arbitral Tribunal’, 26 Arb. Int’l 43, 46–7 (2010). 9  See Edna Sussman and Solomon Ebere, ‘All’s Fair in Love and War—Or Is It? Reflections on Ethical Standards for Counsel in International Arbitration’, 22 Am. Rev. Int’l Arb. 611, 612 (2011). 10  See Chapters 4 and 5.

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From an Invisible College to an Ethical No-Man’s Land discernible, and predictable. The result will be increased efficiency and increased confidence in the legitimacy of arbitral processes. 1.11 As background to this larger project, this first chapter contextualizes the current ethical

quandaries within the larger history of international arbitration and regulation of the globalized legal profession more generally. Section A provides a brief overview of the early modern history of international arbitration. With that background, Section B examines the trends that have led to a breakdown in the informal social controls that had, until recently, adequately substituted for more formal ethical regulation. Section C contextualizes these international arbitration developments in the larger framework of professional regulation of lawyers, analysing how ethical regulation has generally failed to keep pace with the realities of a modern, globalized law practice. Section D weaves these strands back together to assess regulation of attorneys in international arbitration, and concludes with a more detailed preview of the book’s proposal for self-regulation.

A.  The early modern international arbitration system 1.12 Although the origins of international arbitration date back to antiquity, the origins of mod-

ern international arbitration can be traced to the 1920s.11 This was the heyday of Schachter’s Invisible College of international lawyers.12 At that time, the very notion of internationalism was still teetering over its first steps. The weak, and eventually doomed, League of Nations limped along without US participation. The more robust United Nations would only come to be after the gestation of another World War. In this context of nascent internationalism, the notion of effective international adjudication still seemed to be mostly an abstract aspiration.13

1.13 During this earlier era, international commercial arbitration was not the mature, intricate

mechanism we find today. The foundations for the modern system were, however, being laid. The Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927 were more effective for international arbitration than the League of Nations was for global governance, and established the framework for modern international arbitration. Despite their achievements, under the Geneva Protocol and the Geneva Convention, arbitration agreements were still routinely voided14 11  Johnny Veeder, a leading voice in the call for ethical innovation in international arbitration, argues persuasively that an important ‘stepping stone’ for modern arbitration is the much earlier Code by Lord Bramwell, which forms ‘the basis of English statutory law on arbitration’. V.V. Veeder, ‘Two Arbitral Butterflies: Bramwell and David’, in Martin Hunter, Arthur Marriott, and V.V. Veeder (eds.), The Internationalisation of International Arbitration: The LCIA Centenary Conference (Graham & Trotman/Martinus Nijhoff, 1995) 13–15. Closer to the 1920s, in 1917 the Swedish Chamber of Commerce founded the Committee for the Settelement of Disputes in Commerce, Industry and Shipping. Perhaps more importantly, the Court of Arbitration of the International Chamber of Commerce was founded in 1923 and ‘played a major role in the promulgation of the Geneva treaties and of the New York Convention’. Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration (4th edn., 2004) 5 (with Nigel Blackaby and Constantine Partasides). 12  The primary architects of the system were and are often referred to as ‘Grand Old Men’, and shared the features and attitudes identified by Schachter. See Yves Dezalay and Bryant Garth, Dealing in Virtue: International Arbitration and the Construction of a Transnational Legal Order (1996) 35. 13  For a detailed overview of the development of various forms of international adjudication, see Gary B. Born, ‘A New Generation of International Tribunals’, 61 Duke L. Rev. 775 (2011). 14  Throughout the nineteenth century, courts in the United States and England frequently invoked the doctrine of ‘ouster’ to void contractual arbitration clauses which they viewed ‘as unlawful circumventions

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The early modern international arbitration system and arbitral awards were subject to intense judicial scrutiny, sometimes even rewriting.15 Only by virtue of domestic courts’ respect for principles of international comity were arbitral awards enforced at all.16 Expectations about what international arbitration could accomplish were much lower than 1.14 they are today. There were relatively few cases, and their resolution was inherently less predictable in both processes and outcomes. Early international arbitration procedures were primarily compromise-oriented, and characterized by informality and flexibility. Arbitral decisions were revered not so much for their legal accuracy or precision as for their sense of fairness and practical wisdom.17 Since, as noted, judicial enforcement was questionable, awards were generally only as good as they were likely to be complied with voluntarily.18 In keeping with this approach, the arbitrator of yesteryear was often already personally 1.15 known to the parties or counsel, and typically an expert from the same industry as the parties.19 He exercised a paternalistic authority20 and was expected to render a just and equitable result. This objective sometimes meant disregarding the express terms of the contract or the clear provisions of applicable substantive law ‘for the sake of achieving unanimity among the arbitrators and giving something to both parties’.21 Several doctrines developed to facilitate these informal decisional processes. The doctrines of 1.16 amiable compositeur and ex aequo et bono both expressly authorize arbitrators to disregard the strictures of so-called auxiliary rules, such as statutes of limitation, in order to reach more just and equitable outcomes.22 Under ex aequo et bono, arbitrators are also authorized to disregard

of judicial jurisdiction and as denials of judicial justice’. Philip J. McConnaughay, ‘The Risks and Virtues of Lawlessness: A “Second Look” at International Commercial Arbitration’, 93 Nw. U. L. Rev. 453, 462 (1999) (citing Thomas E. Carbonneau, ‘Arbitral Adjudication: A Comparative Assessment of Its Remedial and Substantive Status in Transnational Commerce’, 19 Tex. Int’l L.J. 33, 39 n. 12 (1984)); see also Edward Chukwuemeke Okeke, ‘Judicial Review of Foreign Arbitral Awards: Bane, Boon or Boondoggle?’ 10 N.Y. Int’l L. Rev. 29, 32 n. 13 (1997). 15   As Tom Carbonneau explains, as a result of the ‘stigma of illegitimacy’ attached to arbitration, English law ‘allowed courts to reform or to revise completely an arbitrator’s ruling on the legal questions that arose during the arbitration’. Thomas E. Carbonneau, ‘Arbitral Justice: The Demise of Due Process in American Law’, 70 Tul. L. Rev. 1945, 1948 (1996) (citing Michael J. Mustilland and Stewart C. Boyd, The Law and Practice of Commercial Arbitration in England (2nd edn., 1989)). 16  See Leonard V. Quigley, ‘Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards’, 70 Yale L.J. 1049, 1049–55 (1961). 17  Yves Dezalay and Bryant Garth, ‘Fussing About the Forum: Categories and Definitions as Stakes in Professional Competition’, 21 Law & Soc. Inquiry 285, 295 (1996). 18  One of the important assets of international arbitration is the high rate of voluntary compliance with arbitral awards, which continues today. See Paul Friedland and Stavros Brekoulakis, ‘2012 International Arbitration Survey: Currrent and Preferred Practices in the Arbitral Process’ (2 November 2013) . 19  See W. Lawrence Craig, ‘Some Trends and Developments in the Laws and Practice of International Commercial Arbitration’, 30 Tex. Int’l L.J. 1, 6 (1995). In this chapter, I use the masculine pronoun because it discusses a period in which there were no female arbitrators. Today there are still few women, particularly at the top ranks of the arbitrator profession, which has raised concerns in many corners. 20  Dezalay and Garth, ‘Merchants of Law as Moral Entrepreneurs’, 35. 21  F.A. Mann, ‘The Aminoil Arbitration’, 54 Brit. Y.B. Int’l L. 213, 214 (1983). See also John Beechey, ‘International Commercial Arbitration: A Process Under Review and Change’, 55 Disp. Resol. J. 32 (2000). 22  See Christine Lecuyer-Thieffry and Patrick Thieffry, ‘Negotiating Settlement of Dispute Provisions in International Business Contracts: Recent Developments in Arbitration and Other Processes’, 45 Bus. Law. 577 (1990).

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From an Invisible College to an Ethical No-Man’s Land mandatory rules of law.23 In lieu of national substantive law, in this earlier era, parties often selected a more pliable body of law developed out of customary trade practices and focused on equitable results. This unwritten law of merchants24 or lex mercatoria was developed by academics, who were also actively involved in arbitrations.25 One purpose of lex mercatoria was to permit arbitrators to tailor their decisions to customary trade usages and a gentile interpretation of the principles guiding international commercial transactions.26 1.17 The hallmark of lex mercatoria is its insistence on the notion that a duty of good faith informs

contract interpretation and performance.27 In applying this requirement of good faith, arbitrators could imply terms to achieve a more equitable result. One example would be implying a requirement that a party provide ‘ample notice’ of termination, even if the contract included no such term.28

1.18 These soft-edged standards and procedures suited the international marketplace at the time.

In that era, there were relatively few companies, primarily concentrated in specific industries, such as maritime, construction, and engineering, and certain commodities, such as oil, cotton, and steel.29 Parties that were disputing one day would have to do business with each other another day. The need to continue a business relationship made sharp business tactics and scorched earth litigation strategies counterproductive. International businesses needed to resolve disputes through a kinder, gentler process that would not impair their ability to do business together in the future.30

1.19 In this earlier era, the small cluster of professionals who acted as arbitrators and counsel gener-

ally had shared understandings about what it meant to act honourably and behave ethically.31

23   It is only relatively recently that States have begun to regard their mandatory laws as reaching extraterritorially. The ability of international arbitration to apply and enforce mandatory national laws, including when their application is to events or disputes located outside the relevant nation, is a modern concern within the international arbitration system. See Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc., 473 US 614, 638–40 (1985). 24   See generally,Thomas E. Carbonneau (ed.), Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant (rev. edn.,1998); Michael Joachim Bonell, ‘The CISG, European Contract Law and the Development of a World Contract Law’, 56 Am.J.Comp.L. 1 (2008). 25  Dezalay and Garth, ‘Merchants of Law as Moral Entrepreneurs’, 34. 26  These principles are sometimes referred to as the ‘new lex mercatoria’, because they are a modern reincarnation of the substantive law of merchants that was developed by medieval English mercantile courts. See Berthold Goldman, ‘Lex Mercatoria’, 3 Forum Internationale 3 (November 1983) (‘Lex mercatoria is a venerable old lady who has twice disappeared from the face of the earth and twice been resuscitated.’). 27  See Nikitas E. Hatzimihail, ‘The Many Lives—and Faces—of Lex Mercatoria: History as Genealogy in International Business Law’, 71 Law & Contemp. Probs. 169, 174 (2008) (describing Clive Schmitthoff and Berthold Goldman as the ‘founding fathers of the modern lex mercatoria’ and its impact on international arbitration). 28  See Christopher R.  Drahozal and Richard W.  Naimark (eds.), Towards a Science of International Arbitration: Collected Empirical Research (Kluwer Law International, 2005) 248 n. 66. 29  Paul Bairoch and Richard Kozul-Wright, Globalization Myths: Some Historical Reflections on Integration, Industrialization and Growth in the World Economy, WIDER Conference on Transnational Corporations and the Global Economy, September 1995, 5–18 (arguing that globalized trade primarily consisted of trade in raw goods before the end of World War II; it was not until manufacturing predominated that globalized trade diversified and included manufactured goods). 30  See generally, Dezalay and Garth, ‘Fussing About the Forum’, 295. 31  This is not to suggest that they were infallible or always abided by the highest ethical standards. In a widelycriticized award, in the Petroleum Development Ltd v Sheikh of Abu Dhabi case, Lord Asquith selected English law because Abu Dhabi is ruled by an ‘absolute, feudal monarch’, who ‘administers a purely discretionary

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The early modern international arbitration system Just like other members of Schachter’s Invisible College, they were a self-regulating club of gentlemen that needed no external guidance or regulatory oversight. This group’s sense of nobility and belief in good faith extended to their expectations about how businessmen would behave in their commercial activities. For example, the Geneva Protocol of 1923 did not impose any obligations for coercive enforcement through national courts, but effectively presumed voluntary compliance.32 This assumption was also reflected in the 1923 version of the International Chamber of Commerce (ICC) Rules, which expressly relied on businessmen’s sense of honour to ensure voluntary compliance with arbitral awards.33 By the 1950s, the founders of modern international arbitration realized that the benevolence 1.20 among disputing parties presumed by the Geneva Protocol and the Geneva Convention was insufficient. Real mechanisms for enforcement were needed to corral recalcitrant parties and to press reluctant national courts into enforcing agreements and awards. There were daunting cultural, political, historic, practical, economic, and legal obstacles to creating an effective, reliable, and enduring system of international adjudication.34 But the architects of modern international arbitration were determined in their ‘idealistic experiment in trans-border understanding and cooperation’.35 With these goals in mind, the United Nations Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention) was drafted to replace the Geneva Protocol and Geneva Convention. The New York Convention adopted a more realistic view of the strategic behaviour of participants, and mechanisms for controlling that behaviour.36 Despite its more realistic approach to ensure enforceability of arbitration agreements and 1.21 awards, the Convention reflects an implicit assumption that counsel or arbitrators could be counted on to self-regulate. How else to explain the New York Convention’s conspicuous silence about misconduct by either group?37 Just as arbitrators imposed on parties an implicit and vague obligation to act in good faith, they must have expected the same of their arbitrator colleagues and counsel appearing before them. Specific provisions were apparently regarded as unnecessary. This omission is particularly stark in contrast to early domestic arbitration laws, which were 1.22 promulgated before the New York Convention. In contrast to the New York Convention’s justice with the assistance of the Koran; and it would be fanciful to suggest that in this very primitive region there is any settled body of legal principles applicable to the construction of modern commercial instruments’. See Petroleum Development (Trucial Coast) Ltd. v Sheikh of Abu Dhabi (1951) Award, 18 I.L.R. 144. 32  See John Collier and Vaughan Lowe, The Settlement of Disputes in International Law: Institutions and Procedures (2000) 264. 33  ‘It was expected that moral norms and “the force that businessmen of a country can bring to bear upon a recalcitrant neighbor” would be sufficient to ensure respect for arbitral awards.’ W. Lawrence Craig, ‘Some Trends and Developments in the Laws and Practice of International Commercial Arbitration’ 30 Tex. Int’l L.J. 1, 7 (1995). 34  See Thomas E. Carbonneau, ‘The Ballad of Transborder Arbitration’, 56 U. Miami L. Rev. 773, 774 (2002). 35  See Carbonneau, ‘The Ballad of Transborder Arbitration’. 36  One of the most important developments introduced by the New York Convention was to place the burden of proof in challenging recognition or enforcement of an arbitral award on the award creditor. See Albert Jan van den Berg, The New York Arbitration Convention of 1958 (1981) 9. 37  Today, the grounds for refusing recognition or enforcement under Article V of the Convention are interpreted as encompassing arbitrator bias and certain types of egregious misconduct by counsel. In fact, despite the starkly different language in the Federal Arbitration Act (FAA), the grounds for challenging awards under the Convention are interpreted as being largely coterminous. Alan Scott Rau, ‘The New York Convention in American Courts’, 7 Am.Rev. Int’l Arb.213, 234–5, 257 and n. 20 (1997) (‘[A]‌s a general matter I think it is reasonably safe to assume that in operation the standards of the Convention and the FAA will be identical.’).

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From an Invisible College to an Ethical No-Man’s Land silence, early national arbitration laws were animated by vivid suspicions about the conduct and motives of counsel and arbitrators. For example, the English Arbitration Act of 1950 specifically identified the potential for arbitrator ‘misconduct’ or ‘improper’ procurement of an award as a ground for refusing enforcement of an arbitral award.38 Meanwhile, the drafters of the Federal Arbitration Act (FAA), enacted in the United States in roughly the same period as the Geneva Protocol, demonstrated remarkable creativity in specifying the types of potential misconduct that might give rise to a legitimate challenge to an award. They suspected that awards could be subject to ‘evident partiality’ by arbitrators, ‘corruption, fraud, . . . undue means’ by parties, counsel or arbitrators, and generally by ‘other misbehavior’.39 1.23 In the still relatively close-knit community of international arbitration,40 however, it was

apparently unthinkable—or at least unspeakable—that its pioneers, those members of Schacter’s Invisible College of International Lawyers, could stray from their ‘noble duties.’41 Today, even the staunchest proponents of international arbitration acknowledge that these assumptions are no longer sustainable.42

B.  Modern international arbitration 1.24 Contemporary international arbitration practice stands transformed from earlier eras.

Arbitration is the unrivalled preference for resolving international commercial disputes.43 With the success and related growth of international arbitration, several other important trends have transformed its once cosy community into an ethical no-man’s land. Previously unthinkable challenges to arbitrators’ conduct are now relatively commonplace. Standards for arbitrator conduct, which used to rely on the arbitrators’ internal moral compass, have been replaced with a plethora of more detailed new standards and rules and intensified scrutiny by arbitral institutions. Some commentators worried or have argued, based on an increase in absolute number of challenges, that the expansion of disclosure obligations has led to an increase in challenges,44 a hypothesis that will be addressed later in Chapter 2.45

  Arbitration Act 1950 § 23 (Eng.).   9 USC. § 10(a), (b), (c) (2010) (emphasis added). 40  As Dezalay and Garth have explained, ‘competition for arbitration business favored a few institutions and settings. The International Chamber of Commerce was clearly the leading, even dominant, institution . . . [T]‌he same, relatively few, names of arbitrators were repeated over and over on both sides of the Atlantic’. Dezalay and Garth, Dealing in Virtue, 9. 41  Dezalay and Garth, Dealing in Virtue, 34. 42  Martin Hunter, ‘Ethics of the International Arbitrator,’ 53 Arb. 219, 220 (1987) (concluding that the world of commercial arbitration is no longer a club of gentlemen, but one that needs explicit guidelines for conduct). 43  Sch. of Int’l Arb., Queen Mary University of London, International Arbitration: Corporate Attitudes and Practices 2006 (2006), 5 (‘When . . . respondents were asked which mechanism they preferred to use, 73% stated international arbitration; transnational litigation was preferred by only 11%.’). While some critics, particularly those who focus on the high costs of international arbitration, suggest its popularity may be diminishing, there is no ready alternative unless the case is amenable to resolution through mediation. 44  See Leon Trakman, The Impartiality and Independence of Arbitrators Reconsidered, University of New South Wales Faculty of Law Research Series (Paper 25, 2007), 9–10 (arguing that by enacting comprehensive standards for arbitral conduct, the IBA may have unintentionally encouraged challenges to arbitral awards); David Hacking, ‘Challenges: Theirs is to Reason Why’, 1(6) Global Arb. Rev. (2006) (citing ICC statistics for annual number of arbitrator challenges to argue an increase); Charles N. Brower, ‘Keynote Address: The Ethics of Arbitration: Perspectives from a Practicing International Arbitrator’, 5 Berkley J. Int’l L. Publicist 1 (2010) (reasoning that enactment of comprehensive guidelines and publication of ethical decisions will encourage challenges). 45  See Chapter 2, paras 2.86–2.87. 38 39

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Modern international arbitration Meanwhile, in a parallel development, ethical clashes among, and alleged misconduct by, 1.25 counsel have become more frequent and acute. These clashes are occurring more often, sometimes as a result of good faith disagreement and sometimes as a strategic tool to gain a tactical advantage. These developments have prompted numerous calls for the development of ethical standards to govern counsel,46 increased pressure on international arbitrators to make express rulings regarding attorneys’ ethical conduct, and calls for arbitral tribunals and international organizations to provide additional guidance and resources. The specifics of attorney ethics are addressed in Chapter 3. Attorney conduct is both key to arbitral proceedings, and emblematic of and inter-related to, the conduct of experts and third-party funders, topics that are taken up respectively in Chapters 4 and 5. In addition, the arrival of third-party funders and the increased reliance on and expanded 1.26 role of expert witnesses have introduced whole new categories of participants whose conduct can affect arbitral proceedings. The inherent sense of propriety of these new participants, however, is even less reliable than counsel and arbitrators. The stake that experts and third-party funders have in international arbitration is more attenuated than counsel and arbitrators, and their participation is less inherently constrained by traditions and existing procedures. This Part surveys the three major trends in international arbitration that have produced 1.27 the current backdrop against which all these participants’ ethical conduct is evaluated: Section 1 reviews the growth and diversification of the international arbitration field; Section 2 explores the increase in formalization and transparency of arbitration procedures; and Section 3 examines the increased competitiveness in the market for arbitration services. 1.  Growth and diversification of international arbitration The first and most obvious trend that has transformed international arbitration is its dra- 1.28 matic growth in size and cultural diversity. The current proportions of international arbitration practice undoubtedly surpass even the wildest expectations of its founders. Just in the last decade, the total number of arbitrations has nearly doubled,47 and another sharp increase has occurred since the crash of 2008. These figures do not reflect the number of ad hoc arbitrations or those administered by the growing number of smaller, regional arbitration centres.48 Although today a mainstay, the arrival of American companies and American law firms in 1.29 international arbitration marked an important development in both the growth and diversification of international arbitration.49 Until approximately 30 years ago, international

  See Introduction, page 4, note 13.  Christopher R.  Drahozal and Richard W.  Naimark (eds.), Towards a Science of International Arbitration: Collected Empirical Research (2005) 341 app. 1. Tracking the increase within a single institution, a full ‘two-thirds of all cases brought to ICC arbitration arose in the last 20 years of its 75-year existence’. W. Lawrence Craig et al., International Chamber of Commerce Arbitration (3rd edn., 2000) 2. 48  Dezalay and Garth, Dealing in Virtue, 6–7, n. 4; StephanWilske, ‘Global Competition for the Best Place of Arbitration for International Arbitrations – A More or Less Biased Review of the Usual Suspects and Recent Newcomers’, 1 Contemp. Asia Arb. J.1, 53 (2008). 49  Carbonneau, ‘The Ballad of Transborder Arbitration’, 778 (‘[L]‌eading international lawyers on Wall Street [eventually realized] that transborder arbitration was a force to be reckoned with in international commerce.’); Elena V. Helmer, ‘International Commercial Arbitration: Americanized, “Civilized,” or Harmonized?’, 19 Ohio St. J. Disp. Resol. 35, 40 (2003) (reporting that since the 1970s and early 1980s, ‘[t]he number of American 46 47

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From an Invisible College to an Ethical No-Man’s Land arbitration had been a predominantly European affair. Although a few Americans were active in the international arbitration system since its early beginnings, they arrived in large numbers only in the 1980s. American attorneys brought with them not only a uniquely adversarial American style of advocacy,50 but also a range of ethical standards that were at odds with those of their European counterparts. 1.30 American attorneys can ethically engage in pre-testimonial communications with witnesses

and use aggressive strategic tactics, but are subject to stringent rules against conflicts of interest, duties of candour to the tribunal, and obligations to comply with document requests.51 By contrast, European attorneys have a more relaxed and flexible approach to conflicts of interest, but are usually subject to absolute prohibitions against pre-testimonial communications with witnesses in national court proceedings. European attorneys and arbitrators meanwhile find American litigation strategies ‘barbaric.’52 Even as some leading US firms have become important providers of international arbitration services,53 these problems have not gone away entirely, and are analysed in greater detail in Chapter 2.

1.31 Perhaps the most disruptive importation by American attorneys was their uniquely partisan

approach to the role of the party-appointed arbitrator. Domestic US arbitration procedure historically allowed parties and their counsel to communicate throughout arbitral proceedings with their party-appointed arbitrators, even about crucial issues involving strategy.54 Such communication is considered unacceptable in most other systems,55 and an anathema in

law firms and lawyers offering arbitration services (either as counsel or, in the case of individuals, also as arbitrators) is on the rise’). 50   See generally, Lucy Reed and Jonathan Sutcliffe, ‘The “Americanization” of International Arbitration?’ 16-4 Mealey’s Int’l Arb. Rep. 11 (2001). 51   John Toulmin, ‘A Worldwide Common Code of Professional Ethics?’ 15 Fordham Int’l L. J. 673, 681 (1991/1992). (‘[T]‌he rules of professional conduct in the United States relating to conflicts of interest and imputed disqualification are among the strictest in the world . . . ’.) 52   John Toulmin, ‘A Worldwide Common Code of Professional Ethics?’, 681–85. As will be discussed later, these standards affect attorneys’ and parties’ perceptions of the propriety of conduct of both arbitrators and counsel from other systems. National differences in attorney conflict-of-interest standards as well as arbitrator conflicts and disclosure standards are taken up in Chapter 2. 53  For rankings of law firms and lawyers in international arbitration practice, see paras 1.39–1.42. 54  See, e.g., Sunkist Soft Drinks, Inc. v Sunkist Growers, Inc., 10 F.3d 753, 759 (11th Cir. 1993) (finding no prejudicial misconduct despite finding that party-arbitrator met with representatives and witnesses of appointing party before arbitration to plan strategy). Conflicting cultural perspectives on ex parte communication were not an issue in cases like Sunkist because they involved solely domestic US arbitrations. Even in the United States, however, practices such as arbitrator ex parte communications with the appointing party have met with significant criticism. See, e.g., Carrie Menkel-Meadow, ‘Ethics Issues in Arbitration and Related Dispute Resolution Processes: What’s Happening and What’s Not’, 56 U. Miami L. Rev. 949, 957 (2002). This topic is taken up in greater detail in Chapter 8. 55  Amb. Malcolm Wilkey, ‘The Practicalities of Cross-Cultural Arbitration,’ in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 86 (describing differing approaches to ex parte communication as a problem in international arbitration that must be overcome); Detlev Vagts, ‘International Legal Ethics and Professional Responsibility’, 92 Am. Soc’y Int’l L. Proc. 378, 379 (1998) (discussing a hypothetical case involving contrasting approaches to ex parte communication with arbitrators as basis for panel discussion). See also Hans Smit, ‘Managing an International Arbitration: An Arbitrator’s View’, 5 Am. Rev. Int’l Arb. 129, 131 (1994) (taking the view that communications between party and party-appointed arbitrator concerning the appointment of the presiding arbitrator are generally accepted where the party-appointed arbitrator takes part in the selection process, even if the rules are silent); Hans Smit, ‘The Future of International Commercial Arbitration: A Single Transnational Institution?’ 25 Colum. J. Transnat’l L. 9, 16 n. 40 (1986) (noting that an award rendered by an arbitrator who communicates ex parte with an appointing party ‘may not be recognized in foreign countries’).

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Modern international arbitration international arbitration. This fundamental clash over the role of party-appointed arbitrators became a cornerstone in early debates about arbitrator conduct. Even after the US practice of partisan party-appointed arbitrators has mostly died out in domestic US arbitration, party-appointed arbitrators remain at the centre of modern controversies about arbitrators. The newest, and often most acerbic, attacks on party-appointed arbitrators challenge the propriety of dissenting opinions by co-arbitrators in favour of appointing parties,56 and propose eliminating the process of unilateral party-appointment altogether.57 These issues will be taken up in Chapter 9. International arbitration has diversified well beyond the arrival of American participants. 1.32 This diversification is illustrated, among other things, by the proliferation of arbitral institutions. At the birth of modern international arbitration, there were few institutions, and their activities centred almost exclusively in Europe.58 Beginning in the late 1970s and early 1980s, however, centres began sprouting up around the globe—from Hong Kong, to Cairo, to Vienna, to Kuala Lumpur, to British Columbia. Later, in the early 1990s, new centres arrived in Singapore, the Philippines, Ha Noi, Beirut, Jakarta, Milan, and, for intellectual property disputes, the World Intellectual Property Organization or WIPO in Geneva.59 Even more recently, centres have proliferated throughout Latin America, Africa, and the Middle East.60 In the 1990s, the American Arbitration Association (AAA) also founded the International Centre for Dispute Resolution, or ICDR, to administer international cases. More recently, major European centres like the London Court of International Arbitration (LCIA) and the ICC are sponsoring, supporting, or jointly operating new centres in India,61

56   See, e.g., Albert Jan van den Berg, ‘Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration’, in M. Arsanjani et al. (eds.), Looking to the Future: Essays on International Law in Honor of W. Michael Reisman (2011) 821–43; Jan Paulsson, ‘Moral Hazard in International Dispute Resolution,’ Inaugural Lecture at University of Miami School of Law (29 April 2010), 1 Transnat’l Disp. Mgmt. 10 (2010); Laurent Levy, ‘Dissenting Opinions in International Arbitration in Switzerland,’ 5 Arb. Int’l 34, 41 (1989) (arguing for a code of conduct to govern issuance of dissenting opinions). 57   See Jan Paulsson, ‘Are Unilateral Appointments Defensible?’ Kluwer Arb. Blog, 2 April 2009, (arguing for elimination of party-appointed arbitrators). 58  The American Arbitration Association and the then-fledgling China International Economic and Trade Arbitration Commission (CIETAC) may be considered exceptions to this general rule since they also administered arbitration in their respective geographic homes. 59  In many of these newer institutions, the caseload growth is even more dramatic than that of the original European centres. The Hong Kong International Arbitration Centre went from 54 cases in 1990 to 281 in 2005; the Singapore International Arbitration Centre had only two international cases in 1991, but 29 in 2005. The Hong Kong International Arbitration Centre and the Singapore International Arbitration Centre are arguably among the most prominent regional institutions, which have in turn prompted the development of a new generation of international arbitrators. 60  Doug Sperry, ‘The Impact of International Commercial Arbitration on Developing Nations: Has the Emergence of the International Private Justice Market Narrowed the Gap Between Developed and Developing Parties?’ 40 Hong Kong L.J. 361, 374 (2010). 61  The ICC established its first international court of arbitration in India (New Delhi) in 1923. The LCIA launched its first independent overseas subsidiary in India on 18 April 2009, in New Delhi: see ICC India, ; LCIA India, . However, the Association of Indian Lawyers (AIL) recently successfully petitioned the High Court of Delhi to issue notice to the New Delhi branch of the London Court of International Arbitration (LCIA) to remove the word ‘London Court’ from its name. As of 31 May 2011, no decision has been made. See Soibam Rocky Singh, Delhi HC Issues Notice on Working of London Court of International Arbitration in Delhi, Law et al. News, 31 May 2011, .

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From an Invisible College to an Ethical No-Man’s Land Dubai,62 Singapore,63 and East Jerusalem (for disputes involving parties from Israel and Palestine).64 1.33 While the premier centres still attract most of the mega-cases, the greatest growth in annual

caseloads is occurring at regional centres.65 Just as small community banks and credit unions can carve out a niche by providing service that is better tailored to the local community than large nationwide banks,66 regional arbitration institutions are regarded as providing service and know-how that is more tailored to local markets.

1.34 Predictably, in response to local needs and concomitant with the rise of regional centres, par-

ties are appointing arbitrators and counsel who are from outside the traditionally European pool of participants.67 These trends mean not only participants who are new to international arbitration, but also an increase in participation by lawyers who are not part of the global network of mega-firms. Ultimately, diversification of participants has contributed to a breakdown in the insular, once-shared professional norms. Those shared norms had operated as a basis for informal self-regulation, but as they have broken down, nothing has come in to take their place.

62   The ICC founded a chapter in Dubai in 2004, and the DIFC-LCIA Arbitration Centre was founded in February 2008 as a partnership between the Dubai International Financial Centre (established in 2004) and the LCIA. See ICC-UAE, ; DIC-LCIA Arbitration Centre, . From 2009–10, the DIFC-LCIA registered a dozen cases, involving parties from the UAE, Malaysia, Oman, Norway, the Cayman Islands, Kuwait, Hong Kong, and the British Virgin Islands. The sums in dispute in these cases range from US$50,000–US$100 million. News from the LCIA, 15 NO.2 IBA Arb.News 112. 63   Singapore has become the Asian hub for international arbitration. The Singapore International Arbitration Centre (SIAC) handled 198 new cases in 2010—up from 160 in 2009 and 99 in 2008. As such, the ICC opened a regional office in Singapore in January 2010, and the LCIA opened their New Delhi office in 2009, largely to resolve the large number of Indian arbitrations surging to the SIAC. See SIAC, 2010 CEO’s Annual Report, ; ICC: News, ‘ICC Inaugurates Asia Regional Office’, ; Greg Bousfield, ‘Stepping up to Singapore: LCIA’s Indian Arbitration Mission’, Commercial Dispute Resolution, 29 April 2010, . 64  Catherine A. Rogers, ‘Peace, One Dispute at a Time: The Jerusalem Arbitration Center’, New York Dispute Resolution Lawyer (Spring 2012). 65  Doug Sperry, ‘The Impact of International Commercial Arbitration on Developing Nations’, 361, 378 (describing ‘an opportunity for smaller, regional institutions to gain a foothold in the market and for new arbitrators from those regions to gain entry into what has traditionally been an exclusive club’). 66  Customer Satisfaction with Banks and Credit Unions Increases in 2011: Prime Performance 2011 Bank and Credit Union Satisfaction Survey, , 11 Dec. 2010 (finding significantly higher customer satisfaction with credit unions and small banks). 67  For parties from developing countries, local arbitrators were regarded as necessary to counterbalance what was regarded as biased Western-centric visions that European tribunals imposed in earlier arbitrations. See,e.g., Ahmed Sadek El-Kosheri, ‘Is There a Growing International Arbitration Culture in the ArabIslamic Juridical Culture?’ in Albert Jan van den Berg (ed.), ICCA, International Dispute Resolution: Towards an International Arbitration Culture (1998) 47, 47–48 (noting that, despite the long history and current popularity of arbitration in Arab nations, the Arab legal community remains hostile toward transnational arbitration because of biased treatment by Western arbitrators); John Beechey, ‘International Commercial Arbitration’, 32, 33 (explaining that there ‘remains a huge task’ to convince developing nations that they can expect a fair hearing before international arbitration tribunals); Dezalay and Garth, Dealing in Virtue, 43–45.

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Modern international arbitration 2.  Formalization and increased transparency Related to international arbitration’s growing in size and diversity, in recent years it has also 1.35 become procedurally more formal and transparent.68 Under current practices, parties rarely empower arbitrators to decide the matter as amiable compositeur or ex aequo et bono.69 Instead of these open-textured but opaque procedures, arbitral procedure has become more definite and precise. The result is greater transparency about how and why arbitral decisions are made. While arbitrators once had vast, unchecked discretion in ordering procedures, modern arbitral rules have shifted to give parties more control over the presentation of evidence, in part by imposing formal rules that standardize arbitrators’ evaluation of evidence.70 One clear illustration of this shift is the ICC Rules. The ICC Rules implement the consensus that awards should be rendered with reasons71 and expressly prohibit arbitrators from acting as amiable compositeurs unless the parties expressly authorize them to do so.72 Another example is the International Bar Association’s Rules for the Taking of Evidence in International Arbitration and other practice guidelines and protocols that arbitrators routinely adopt in some form to order proceedings.73 At a substantive level, lex mercatoria is now rarely selected by the parties.74 Instead, choice-of- 1.36 law clauses usually require application of national law, which increases predictability and avoids application of law that is not well developed.75 The total effect of these developments

68   The term ‘transparency’ is subject to various interpretations. In this book, I use the term to mean the ready availability, primarily to parties, of the rules that regulate and govern international arbitration processes and decision-making. For further analysis of how transparency is often confused with, but is distinguishable from, ‘public access’ and ‘disclosure’, see Catherine A. Rogers, ‘Transparency in International Commercial Arbitration’, 54 U. Kan. L. Rev. 1301, 1319 (2006). 69   One earlier study of 500 arbitration clauses revealed that only 3% of clauses empowered the arbitrators to decide under these doctrines. See Christopher R. Drazohal, ‘Commercial Norms, Commercial Codes, and International Commercial Arbitration’, 33 Vand. J. Transnat’l L. 79, 129 n. 233 (2000) (citing study of clauses from 1987–89). 70   See Detlev Vagts and W. Michael Reisman, ‘International Chamber of Commerce Arbitration’, 80 Am. J. Int’l L. 268 (1986) (reviewing W. Laurence Craig et al., International Chamber of Commerce Arbitration (1984)). 71  William W. Park, ‘Income Tax Treaty Arbitration’, 10 Geo. Mason L. Rev. 803, 823 (2002) (‘The marketplace has pushed international arbitration toward reasoned awards.’); Rt. Hon. Lord Justice Bingham, ‘Reasons and Reasons for Reasons: Differences Between a Court Judgment and an Arbitral Award’, 4 Arb. Int’l 141, 145 (1988) (noting the ‘strong balance of international opinion in favour of the giving of reasons by arbitrators’); Donald P. Arnavas and Rt. Hon. Lord David Hacking, Using ADR to Resolve International Contract Disputes, Briefing Papers no. 04-11 (Oct. 2004) (explaining that reasoned awards have always been the norm in international arbitration, but with the shift to more formalized and rule-based decision-making, awards have necessarily become longer and more detailed). 72  See ICC R. Arb.art. 17(3) (1 Jan. 1998), (regarding amiable compositeurs); ICC R. Arb. art. 25(2) (requiring reasoned awards). Similarly, the AAA website admonishes, ‘You should not compromise unless the dispute clearly calls for this result. Parties generally expect a decision on the issues.’ American Arbitration Association, A Guide for Commercial Arbitrators, . 73  See Born, International Commercial Arbitration (2014) 2269. 74  See Drazohal, ‘Commercial Norms, Commercial Codes, and International Commercial Arbitration’,129. 75  See Christopher R. Drahozal, ‘Contracting Out of National Law: An Empirical Look at the New Law Merchant’, 80 Notre Dame L. Rev. 523, 537–46 (2005) (reporting results of empirical research that demonstrate parties overwhelmingly choose national law and hypothesizing that national law is preferred because it is more predictable than alternative transnational legal rules); 2010 International Arbitration Survey: Choices in International Arbitration, Queen Mary University of London, 11–16 (highlighting the fact that many corporations now rely on choice of law provisions to determine which substantive law will govern a dispute,

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From an Invisible College to an Ethical No-Man’s Land is that international arbitration has become a more complex, sophisticated, and formal method for resolving international disputes.76 1.37 Critics complain that in its modern incarnation, international arbitration is less recognizable

as a form of ‘alternative dispute resolution’77 than as a type of ‘offshore litigation’.78 This transformation has been both celebrated and decried as the ‘judicialization’ of arbitration and, in some instances, the ‘Americanization’ of international arbitration.79 While there is considerable debate regarding the efficacy of some of these developments,80 they have undoubtedly increased transparency and raised new challenges regarding the ethical conduct of participants in the system.

1.38 As the procedures that govern arbitral proceedings have become more refined, formal,

and transparent, they increasingly contrast with integrally related ethical issues, which remain vague, indeterminate, and hopelessly ad hoc. The result is an increased pressure for advances in the rules that govern the professional conduct of various actors in the system. One response to these increased pressures was the promulgation of the IBA Guidelines on Conflicts of Interest in International Arbitration regarding arbitrators, along with various efforts by arbitral institutions to make their disclosure and challenge standards more transparent and predictable. These developments are explored in Chapters 2 and 6. With regard to counsel ethics, advances have been much slower, but momentum has been growing and important new developments (taken up in Chapters 3 and 6) are in the works.81 Even more recently, and less developed, are responses to growing concerns about the conduct of experts and third-party funders (taken up respectively in Chapters 4 and 5).

discussing the procedures that institutions use to make this choice, and arguing certain factors lead entities to use these mechanisms); see also Ryan E. Bull, Note, ‘Operation of the New Article 9 Choice of Law Regime in an International Context’, 78 Tex. L. Rev. 679, 706 (2000). 76   While the trend is important to recognize, the goal of formality should not be overstated. For many, flexibility remains an important feature of international arbitration. 77   See Christian Bühring-Uhle, Arbitration and Mediation in International Business: Designing Procedures for Effective Conflict Management (Kluwer Law International, 1996) 17–36. 78  Dezalay and Garth, ‘Fussing About the Forum’, 311. 79  See generally, R. Lillich and C. Brower (eds.), International Arbitration in the 21st Century: Towards ‘Judicialization’ and Uniformity [Twelfth Sokol Colloquium] (1993) (critiquing the need for balance between flexibility and certainty); Klaus Peter Berger, Private Dispute Resolution in International Business (2006) 303 (‘It is particularly in major, multi-million dollar arbitrations that the informal atmosphere . . . has given way to confrontation and litigation tactics, hitherto known only from proceedings before national courts. Over the past decades, the arbitral process has undergone a fundamental transformation which is often characterized as the “judicialization” of arbitration . . .’). 80  Critics of the ‘Americanization’ of international arbitration use the term to describe a growing ‘unbridled and ungentlemanly aggressivity and excess’ in arbitration, a ‘total warfare’ characterized by excesses of US-style discovery and distended briefs and document submission. Yet most scholars view the trend not so much as one of ‘judicialization’ or ‘Americanization’, but rather as one of ‘harmonization’ or ‘homogenization’—a merging of common and civil law traditions. See Kevin T. Jacobs and Matthew G. Paulson, ‘The Convergence of Renewed Nationalization, Rising Commodities, and “Americanization” in International Arbitration and the Need for More Rigorous Legal and Procedural Defenses’, 43 Tex. Int’l L.J. 359, 364 (2008); Elena V. Helmer, ‘International Commercial Arbitration: Americanized, “Civilized”, or Harmonized?’ 19 Ohio St. J. on Disp. Resol. 35, 37 (2003); Nicolas C. Ulmer, ‘A Comment On “The ‘Americanization’ of International Arbitration?” ’ 16-6 Mealey’s Int’l Arb. Rep. 1 (2001); Lucy Reed and Jonathan Sutcliffe, ‘The “Americanization” of International Arbitration?’ 16-4 Mealey’s Int’l Arb. Rep. 11 (2001). 81  See Chapter 3, paras 3.85–3.103.

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Modern international arbitration 3.  Economic competition in international arbitration Another important trend, related to its expansion and diversification, is that international 1.39 arbitration has become more expressly entrepreneurial. Arbitration awards mean not only large awards for prevailing parties, but also large fees for those rendering arbitral services. In law firms, international arbitration practice groups compete to get the biggest and most high-profile cases.82 Arbitral institutions compete to attract cases. States, and even cities, compete to attract arbitration business.83 Arbitrators compete to preside over the largest and most high-profile cases.84 Today, scorekeepers keep careful track of all this data. An ‘Annual Scorecard’ published by The American Lawyer magazine provides what it calls 1.40 ‘[a]‌n inside look at more than 100 major disputes from the secret world of arbitration.’85 Ratings agencies provide industry evaluations,86 academics conduct empirical research to measure which institutions and States attract the most cases,87 and various industry 82  Actual data on attorney fees in international arbitration is often prone to exaggeration and extrapolation, with little empirical evidence. However, the generous size of such fees can be inferred from data on international arbitral awards. See, e.g., David Smith, Note, ‘Shifting Sands: Cost and Fee Allocation in International Investment Arbitration’, 51 Va. J. Int’l L. 749 (2011) (citing numerous examples of legal costs in international investment arbitration); Susan D. Franck, ‘Empirically Evaluating Claims About Investment Treaty Arbitration’, 86 N.C. L. Rev. 1, 66–68 (2008) (while the empirical validity of claims of costs of arbitration is uncertain, costs often run in the US$ millions, with legal fees a significant part); David A. Gantz, Investor-State Arbitration Under ICSID, The ICSID Additional Facility and the UNCTAD Arbitral Rules, (US Vietnam Trade Council Seminar Series, 2004) 23, (legal fees for major law firms who represent investors and host governments range from US$200 to US$500 per hour, but may be negotiable (downward)). 83 William W. Park, ‘National Law and Commercial Justice: Safeguarding Procedural Integrity in International Arbitration’, 63 Tul. L. Rev. 647, 680 (1989) (documenting a ‘scramble among Western European nations’ to compete for international arbitration business); Sir Michael J. Mustill, ‘Arbitration: History and Background’, 6-2 J. Int’l Arb. 43, 53 (1989) (‘[O]‌ne must take note of the efforts made by individual nations to make their arbitration laws . . . more attractive.’). Efforts by specific jurisdictions such as Japan, Singapore, New York, and Florida to attract international arbitration business are discussed in Chapter 1, paras 1.78–1.84. 84  John Yukio Gotanda, ‘Awarding Costs and Attorneys’ Fees in International Commercial Arbitrations’, 21 Mich. J. Int’l L. 1, 1–3 (1999) (noting that an overwhelming number of countries permit arbitrators to award costs and fees, which often run into the millions of dollars). One detractor goes so far as to argue that since arbitrators’ fees under the ICC Rules are set based on ‘the complexity of the case, as reflected in the award’, arbitrators have ‘an incentive to write unnecessarily elaborate opinions’. Julia A. Martin, ‘Arbitrating in the Alps Rather Than Litigating in Los Angeles: The Advantages of International Intellectual Property-Specific Alternative Dispute Resolution’, 49 Stan. L. Rev. 917, 967 (1997). 85  To create the Scorecard, reporter Michael Goldhaber gathers and publishes information about the largest arbitrations relying ‘primarily on information supplied by lawyers involved in the cases, supplemented in some cases by arbitration or court papers, securities disclosures, and media reports. In many cases we have had to rely on information from only one side in the dispute, and we were not able to obtain a response from the other side in all cases’. Michael D. Goldhaber, ‘Arbitration Scorecard: Methodology’, The American Lawyer (Online) 1 July 2011, . 86  2011–2012 ‘Best Law Firms’, US News and World Report, (rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process); Chamber and Partners (5 Feb. 2012), (allowing parties to search for highly ranked firms and attorneys based on specified practice area and expertise within given arbitral institution). 87  2010 International Arbitration Survey: Choices in International Arbitration, Queen Mary University of London, 18–19 (finding that London, England was the most popular choice of seat for international arbitrations; followed by Geneva, Switzerland; Paris, France; Tokyo, Japan, and others. Factors that helped determine the seat include: convenience, infrastructure, application of substantive law, corporate policy, location of parties, and less influential concerns).

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From an Invisible College to an Ethical No-Man’s Land publications have started awarding prizes that distinguish top performers.88 These sources not only measure competition within the industry, but also increase the stakes of that competition. 1.41 Not surprisingly, all this competition has produced a new breed of arbitrator, who regards

participation in arbitration as an entrepreneurial venture.89 Meanwhile, since service as an arbitrator is one of the best credentials for attracting business as counsel, arbitrator status is no longer pursued solely as an end in itself. It is also a means of increasing a lawyer’s rainmaking potential.90 As Jan Paulsson has explained, ‘the age of innocence has come to an end . . . [and] the delightful discipline of a handful of academic aficionados . . . has become a matter of serious concern for great numbers of professionals determined to master a process because it is essential to their business’.91

1.42 These various trends—the expansion, diversification, increased transparency, and increased

competitiveness—have important implications for the ethical conduct of participants in international arbitration. In many respects, these trends track the expansion and globalization of the legal profession more generally and therefore are best understood in light of those developments.

C.  Globalization of the legal profession 1.43 The ethical challenges facing international arbitration practice echo the challenges facing

national legal professions more generally. As Detlev Vagts observed years ago in his call for international governance of the legal profession, in close-knit professional communities, everyone ‘know[s]‌what they are supposed to do. In the rare case that somebody is tempted to lapse from grace, the prospect of disapproval by one’s peers is deterrence enough’.92 As national and global legal practice expanded in size and diversified geographically, informal mechanisms became clearly inadequate, just as in international arbitration.

88   Among the most well-known prizes are those administered by the Transnational Dispute Management Journal and OGEMID. See . 89  As the Special Committee on Professionalism of National Academy of Arbitrators summarized: ‘There are those among us who view arbitration primarily as a business. They are likely to concentrate more on self-interest than the interest of the profession . . . We recognize that arbitrators are no less ambitious than other professionals; we recognize that many of us are dependent on arbitration fees for a livelihood.’ Report of Special Committee on Professionalism of National Academy of Arbitrators, Daily Lab. Rep. (BNA) No. 106, E-1, E-4 (4 June 1987), cited in Alan Scott Rau, ‘Integrity in Private Judging’, 38 S. Tex. L. Rev. 485, 485 (1997). See also Dezalay and Garth, Dealing in Virtue, 34–36. 90 Although arbitrators’ fees are often pointed to as extravagant, in fact empirical research indicates that they represent only a small fraction of the overall costs of an arbitral dispute. Attorney fees are by far the highest percentage of costs. ICC Commission Report on Techniques for Controlling Time and Costs in Arbitration, (finding that only 18% of costs are attributable to arbitrator and administrative fees). The implication, verified by anecdotal research, is that partners at leading law firms, whose fees on a particular case involve an entire team of attorneys, earn more as counsel than when serving in the same case as an arbitrator. 91  Dezalay and Garth, Dealing in Virtue, 37. In a similar vein, David Hacking reflects, ‘The small community of international arbitrators, who know and trust one another, is gone. Peer-group control will no longer be here to preserve the “ethics” of international arbitration’. David Hacking, ‘Ethics, Elitism, Eligibility: A Response: What Happens if the Icelandic Arbitrator Falls Through the Ice?’ 15 J. Int’l Arb.73, 77 (1998). 92  Detlev F. Vagts, ‘The International Legal Profession: A Need for More Governance?’ 90 Am. J. Int’l L. 250, 250 (1996).

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Globalization of the legal profession 1.  The rise of the mega law firm Until the last 40 years, most lawyers were sole practitioners or members of relatively inti- 1.44 mate firms of partners all of whom knew each other and primarily serviced local clients on local matters in local courts.93 In the United States, the few firms that ventured overseas did so only haltingly and usually in response to a specific client need rather than as part of a larger mission to establish a global practice.94 There was no such thing as a global law firm, and even the largest firms would be considered miniscule in comparison with today’s behemoths. When law practice was primarily local, professional regulation was informal and more about 1.45 social cohesion. As Charles Wolfram explains, bar associations in the United States grew out of ‘eating clubs’.95 This tradition, in turn, developed out of the English socializing function of the Inns of Court in London. The Inns of Court were instrumental in acculturating new members and still have eating rooms as a central feature of their architecture.96 Formal regulation was similarly underdeveloped at the national level, and written codes were scarce and largely regarded as unnecessary.97 Back when the New York Convention was being drafted in the 1950s, the American Bar 1.46 Association’s ambitious new Canon of Attorney Ethics was only a few decades old. Soon enough, it would prove to be highly unsatisfactory. The Code of Professional Responsibility would not replace it until 1970, and the ink was still drying on the American Canons of Judicial Ethics, which were regarded as largely advisory.98 On the other side of the Atlantic, the British Solicitors’ Practice Rules had only been penned in 1936, but in most other parts of Europe and the rest of the world, written codes and organized bar associations were still largely unknown.99 It was not until 1977 that the Council of Bars and Law Societies of Europe (the

93   As Mary Daly explains: ‘Until recently, lawyers infrequently practiced in more than one state. Law firms rarely established branch offices, with the possible exception of an office in Washington, D.C. or in a distant city to meet the particular needs of a single client. Consequently, in searching for ethical guidance, lawyers, courts, and disciplinary authorities looked only to the professional standards adopted by a single jurisdiction, the lawyer’s state of general admission or the court to which the lawyer had been admitted pro hac vice.’ Mary C. Daly, ‘Resolving Ethical Conflicts in Multijurisdictional Practice—Is Model Rule 8.5 the Answer, an Answer, or No Answer at All?’ 36 S. Tex. L. Rev. 715, 719 (1995). For an insightful analysis of how the term ‘partner’ has become something of a misnomer as US law firms have erupted into large corporate-like structures that sprawl across multiple jurisdictions, see David B. Wilkins, ‘Partner, Shmartner! EEOC v Sidley Austin Brown & Wood’, 120 Harv. L. Rev. 1264 (2007). 94  One of the earliest examples is when John Foster Dulles of New York firm Sullivan & Cromwell played a key role in the negotiations of the Versailles Treaty at the end of the First World War and his firm went on to promote capital flow from North America to Europe. John Flood and Fabian Sosa, ‘Lawyers, Law Firms, and the Stabilization of Transnational Business’, 28 Nw. J. Int’l L. & Bus. 489, 502 (2008). 95  See, e.g., Charles W. Wolfram, Modern Legal Ethics (1986) 53. 96  As Lord Woolf has explained, ‘All barristers will have to be members of one of the four Inns of Court and before they are called to the bar by their Inn. The dining process is an important part of developing the collegiate culture which contributes to professional standards.’ Right Hon. Lord Woolf, ‘The Atlantic Divide’, 34 Tulsa L.J. 657 (1999); see also Peter A. Joy, ‘Making Ethics Opinions Meaningful: Toward More Effective Regulation of Lawyers’ Conduct’, 15 Geo. J. Legal Ethics 313, 321 and n. 23 (2002) (noting that at the Inns of Court in London ‘initiates to the legal profession joined a close-knit group with common eating rooms and common goals’). 97  See Detlev F. Vagts, ‘Professional Responsibility in Transborder Practice: Conflict and Resolution’, 13 Geo. J. Legal Ethics 677, 688–9 (2000); Vagts, ‘The International Legal Profession’, 250. 98  See Ronald D. Rotunda, ‘Judicial Ethics, the Appearance of Impropriety, and the Proposed New ABA Judicial Code’, 34 Hofstra L. Rev. 1337, 1353 (2006). 99  See Vagts, ‘The International Legal Profession’, 250.

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From an Invisible College to an Ethical No-Man’s Land CCBE) drew up a very general statement of the principles of professional conduct that apply to European lawyers, known as the Declaration of Perugia.100 1.47 Today, the small legal communities of the 1950s have mostly given way to larger, increasingly

dispersed law firms.101 This is particularly true with respect to US- and UK-based firms. As David Wilkins describes: In the 1960s, there were only twenty law firms in New York City with more than fifty lawyers, with the largest, Shearman & Sterling, consisting of 125 lawyers. By the turn of the twentieth century, there were more than 250 U.S. firms larger than Shearman’s old size, with more than ten firms of over 1000 lawyers. The growth since 2000 has been even more torrid—until, of course, the fourth quarter of 2008. In 2006, the median size of the nation’s 250 largest firms had ballooned to over 500, with more than twenty firms topping the scales at over 1000—and four breaking the 2000-lawyer barrier.102

Comparatively, of the top 100 European and top 200 UK law firms in 2011 and 2010, respectively, four firms had over 2000 lawyers, eleven boasted more than 1000 lawyers and 31 firms had over 500 lawyers.103 European law firm growth has been most pronounced in the UK. Until 1967, a statute capped London firms at 20 persons,104 but UK firms rapidly expanded during the mid-1980s. By 2010, six of the top 20 worldwide firms were headquartered in the UK.105 Similarly, whereas not a single German corporate firm had more than 50 lawyers in 1989,106 by 2010 16 of the top 100 European firms were German.107 1.48 As a result of this growth in the size of law firms and national legal practices more generally,

most countries now have written codes of ethics, even if there remains significant variation in their level of detail and available sources of interpretation.108 Perhaps even more striking than the relative growth in size of law firms is the geographic diversification of the legal profession.

100  CCBE, The Declaration of Perugia on the Principles of Professional Conduct of the Bars and Law Societies of the European Community (1977). See also Louise L. Hill, ‘Lawyer Publicity in the European Union: Bans Are Removed but Barriers Remain’, 29 Geo. Wash. J. Int’l L. & Econ. 381, 390 (1995) (explaining that the Declaration of Perugia attempted to harmonize and define common principles for the various rules of professional conduct for EU lawyers). 101  See Marc Galanter and William Henderson, ‘The Elastic Tournament: A Second Transformation of the Big Law Firm’, 60 Stan. L. Rev. 1867, 1882 (2008). 102  David B. Wilkins, ‘Team of Rivals? Toward a New Model of the Corporate Attorney-Client Relationship’, 78 Fordham L. Rev. 2067, 2089 (2010) (internal citations omitted); see also James W. Jones, ‘The Challenge of Change: The Practice of Law in the Year 2000’, 41 Vand. L. Rev. 683 (1988). 103  In 2009, of the top 100 European firms, one firm (Garrigues) had over 2000 lawyers, two had over 1000, and six had over 500. See ‘European 100: The Continental Elite 2011’, The Lawyer, ; ‘UK Annual Report 2010: The Cost of Cutting’, The Lawyer, ; ‘European 100: The Continental Elite 2009’, The Lawyer, . 104  John Flood, ‘Megalaw in the U.K.: Professionalism or Corporatism? A Preliminary Report’, 64 Ind. L.J. 569 (1989). 105  ‘The Am Law 100 2010: Gross Revenue: Baker & McKenzie Tops Skadden’, American Lawyer, . 106  Glenn Morgan, ‘Institutional Legacies and Firm Dynamics: The Growth and Internationalization of UK and German Law Firms’, 26(12) Org. Stud. 1765, 1773 (2005). 107  ‘European 100: The Continental Elite 2011’, The Lawyer, . 108  Geoffrey C. Hazard Jr and Angelo Dondi, Legal Ethics: A Comparative Study (2004) 152–3. For example, in Korea, the documents that delineate attorneys’ ethical obligations ‘are collectively six pages long’. Robert W. Wachter, ‘Ethical Standards in International Arbitration: Considering Solutions to Level the Playing Field’,

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Globalization of the legal profession 2.  The mega-firm goes global In the same period that small firms gave way to larger firms and informal social controls 1.49 gave way to formal regulation, localism gave way to globalism. Foreign offices are no longer eccentric analogues to a firm’s ‘main practice’. At least in US and UK law firms, an overseas presence is today an essential credential for competing effectively in the global marketplace. The figures measuring this transition are staggering. Prior to World War II, only four US law firms had an overseas office.109 By 2004, 64 of the 1.50 top US-based firms had offices abroad supporting 386 foreign law offices in 55 cities staffed by over 8,700 attorneys.110 US-based firms had several inherent advantages in globalizing, beginning with their early size advantage, which in turn has led to greater opportunities for profits and expansion.111 Globalization has become a key factor for law firm profitability and success.112 As of 2009, five out of 10 of ‘the world’s highest-grossing firms had more than 60% of their lawyers working in countries outside of the firm’s home country.’113 These developments are similarly reflected in World Trade Organization (WTO) statistics 1.51 about global trade in legal services, which show the United States having 54% of international trade in legal services, Europe with 36.5%, and Asia with 9.4%.114 Despite these developments, there is an inherent tension underlying the globalization of 1.52 legal practice. Globalization is about opening markets for suppliers, increasing competition among them, and increasing choice for consumers of their products. From the perspective of economists and trade representatives, these goals would seem to apply to legal services as much as any other service industry.115 These goals are not, however, always an easy fit with

24 Geo. J. Legal Ethics 1143, 1149–50 (2011). In their brevity, these sources ‘leave out details about what specific tactics are permitted or forbidden in adversarial proceedings’ and ‘there is very little written commentary on this subject from academics and practitioners’. See Wachter, ‘Ethical Standards in International Arbitration’, 1049. The explanation for this ‘dearth’ of formal regulation is that ‘The Korean bar is relatively small and culturally homogeneous, so the unwritten and unspoken code fills in all of the gaps from the six pages of the Ethics Charter and the Ethics Regulation’. Wachter, ‘Ethical Standards in International Arbitration’, 1049. 109  See Carole Silver, ‘Winners and Losers in the Globalization of Legal Services: Situating the Market for Foreign Lawyers’, 45 Va. J. Int’l. L. 897, 916–17 (2005) (noting the growth of foreign offices backed by US law firms). Notably, these statistics come from a study of only 60 firms; the overall number is probably higher. 110  Silver, ‘Winners and Losers in the Globalization of Legal Services’, 916. 111  The historical dominance of US firms may soon be challenged. US law firms are generally prohibited from engaging in multi-disciplinary practice structures, but must compete with such structures that are increasingly permitted by competing jurisdictions, such as the UK and Australia. See Ted Schneyer, ‘“Professionalism” as Pathology: The ABA’s Latest Policy Debate on Non-lawyers’ ownership of Law Practice Entities’, 40 Fordham Urb. L.J. 75 (2012). 112  See Steven Mark, ‘Harmonization or Homogenization? The Globalization of Law and Legal Ethics—An Australian Viewpoint’, 34 Vand. J. Transnat’l L. 1173 (2001). 113  Compare ‘The Global 100’, 10/2009 Am. Law. 191 (2009); with ‘The Great Game’, 10/2009 Am. Law. 134 (2009). 114  WTO, Council for Trade in Services, LegalServices—Background Note by the Secretariat, WTO Doc S/C/W/43, , select ‘Search’, select ‘All documents’, search Document number: ‘98-2691’ [1998 WTO Report]; WTO, Council for Trade in Services, LegalServices—Background Note by the Secretariat, WTO Doc S/C/W/318, . 115  For an insightful analysis of the trade implications on legal services, see Laurel S. Terry, ‘The Future Regulation of the Legal Profession: The Impact of Treating the Legal Profession as “Service Providers”’, J. Prof. Law. 189 (2008); Laurel S. Terry, ‘From GATS to APEC: The Impact of Trade Agreements on Legal Services’, 43 Akron L. Rev. 875 (2010).

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From an Invisible College to an Ethical No-Man’s Land the conventional view of lawyers as creatures of national law, national training, and national licensing and regulation. 1.53 Lawyer self-regulation has historically been premised on a ‘state-sanctioned [monopoly on]

the delivery of legal services in return for assurances of ethical behavior’ by the legal profession.116 While a professional monopoly has traditionally been a defining feature of the legal profession, its pre-eminence is being challenged by the march toward increasingly global free markets and by development of overlapping national regulatory authority over professional activities. This tension raises many questions for the regulation of transnational legal services, with special implications for international arbitration.

D.  Regulation of transnational law practice 1.54 Contemporary law practice, including international arbitration practice, is indisputably

global, with even small and medium-sized firms participating in the global market for legal services.117 Ethical regulation by bar authorities, however, remains largely local and territorial.118 The distinction between these two phenomena can be likened to two contrasting maps.119 Ethical regulation is like a map delineating the physical territories of political entities. Law practice, however, is like a map of weather patterns. Political units regulate within their borders and carefully guard against various types of intrusion. No sovereign, however, expects or attempts to prevent clouds or the wind from passing into or out of their territory. Until recently, domestic professional regulatory authorities seemed to treat the globalization of law practice as a force of nature, as difficult to control as the weather.

1.55 One particularly poignant example of this sense of regulatory impotence is in the aftermath

of the disastrous gas leak at the facility of a Union Carbide subsidiary in Bhopal, India in 1984. Within hours after gruesome details became public, dozens of American attorneys descended en masse on distressed, unsophisticated, and often illiterate Indian victims. In apparent violation of several US ethical rules, and in clear violation of Indian ethical rules,120 these US attorneys directly solicited victims and convinced them to sign contingent fee retainer agreements for tort actions to be brought in the United States. Apparently, the fact that many victims did not speak English or understand the agreements did not influence 116  Laurence Etherington and Robert Lee, ‘Ethical Codes and Cultural Context: Ensuring Legal Ethics in the Global Law Firm’, 14 Ind. J. Global Legal Stud. 95, 97 (2007). 117  See Carole Silver, ‘Regulatory Mismatch in the Market for Legal Services’, 23 Nw. J. Int’l L. & Bus. 487, 495 (2003) (‘The international label is not claimed only by large law firms; even small firms participate in this specialty.’). This phenomenon is a logical counterpart of the increased participation of smaller and mediumsized companies in the global economy. 118  Laurel S. Terry, ‘A Case Study of the Hybrid Model for Facilitating Cross-Border Legal Practice: The Agreement Between the American Bar Association and the Brussels Bars’, 21 Fordham Int’l L.J. 1382, 1384 (1998) (‘[D]‌espite the increase in scholarly writing on this topic, the development of cross-border practice throughout the world has vastly outpaced the theory of whether and how such practice should be regulated’); Justin Castillo (Reporter), ‘International Law Practice in the 1990s: Issues of Law, Policy and Professional Ethics’, 86 Am. Soc’y Int’l L. Proc. 272, 282 (1992) (‘International . . . ethics is an area where there is little solid information available’). 119  This image is borrowed from Bernard L. Greer, Jr, ‘Professional Regulation and Globalisation: Toward a Better Balance’, in J. Ross Harper (ed.), Global Law in Practice (1997) 169, 169–70. 120  In India there is ‘an absolute bar’ on attorney advertising and solicitation, which would even preclude Indian attorneys from being listed on a referral website. Michael A. Gollin, ‘Answering the Call: Public Interest Intellectual Advisors’, 17 Wash. U. J. L. & Pol’y 187, 209 (2005).

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Regulation of transnational law practice the attorneys’ efforts. One attorney boasted that he had obtained more than 7,000 signed contingency fee agreements within five working days of the gas leak, meaning approximately one agreement every 60 seconds.121 Despite the apparent ethical violations,122 neither US nor Indian bar authorities ever sought 1.56 to discipline these attorneys.123 Whatever other reasons may have contributed, one explanation for the inaction was likely that the relevant regulatory authorities regarded the attorney conduct at issue as outside the purview of their disciplinary power. For the American authorities, their rules and disciplinary jurisdiction did not apply overseas in 1984.124 For the Indian authorities, their ethical rules did not apply to foreign attorneys acting in court cases pending in the United States.125 Today, similar conduct is less likely to escape some form of regulatory oversight or discipline 1.57 from either the host or the home jurisdiction. Two more recent cases alleging mass toxic tort claims in Nicaragua and Ecuador illustrate the point. In both cases, US attorneys have faced serious potential discipline in the United States for alleged misconduct that occurred in the foreign country and related to foreign proceedings.126 It is not only the passage of time that produced different responses.127 These later cases registered on the radar of disciplinary authorities not because of new activism, but because complaints were brought by opposing   David T. Austern, ‘Is Lawyer Solicitation of Bhopal Clients Ethical?’ Legal Times, 21 Jan. 1985, 16.   See Austern, ‘Is Lawyer Solicitation of Bhopal Clients Ethical?’; ‘Bhopal Is for Lawyers’, 37 (1) Nat’l. Rev., 11 Jan. 1985, 20. 123   Perceptions of opportunism by US attorneys may have contributed to India’s decision to become the sole representative of the Bhopal victims and its opposition to any compensation being paid to attorneys who initiated the cases in the United States. 124   In fact, it was not until 2006 that the American Bar Association explicitly provided through Model Rule 8.5, one of the Model Rules that can be adopted by individual states, that jurisdiction of state regulatory authorities would extend to attorney conduct outside the United States. For an extended discussion of the jurisdiction and choice-of-law issues related to regulation of US attorneys engaged in law practice outside the United States, see Catherine A. Rogers, ‘Lawyers Without Borders’, 30 U. Penn. Int’l L. Rev. 1035 (2009). 125   Contingency fees are generally prohibited in most other countries, although recently there has been some softening as many European jurisdictions are exploring. Mark A. Behrens et al., ‘Global Litigation Trends’, 17 Mich. St. J. Int’l L. 165, 183–84 (2009). 126   See In re Girardi, 611 F.3d 1027 (9th Cir. 2010), amended, 08-80090, 2010 WL 3517899 (9th Cir. Sept. 10, 2010) (holding that a formal reprimand of one attorney was appropriate discipline for recklessness in determining false statements or documents, and six-month suspension was appropriate discipline for attorneys’ knowing submission of false documents); In re Chevron Corp., 749 F. Supp. 2d 141, 146 (S.D.N.Y. 2010), aff’d sub nom. Lago Agrio Plaintiffs v Chevron Corp., 409 F. App’x. 393 (2d Cir. 2010) (denying motion to quash subpoena seeking testimony and documents from a New York attorney regarding alleged misconduct, including intimidating Ecuadorian judges, obtaining political support for the Ecuadorian lawsuit, procuring and packaging expert testimony for use in Ecuador, pressuring Chevron to pay a large settlement, and obtaining a book deal); Michael Goldhaber, ‘Chevron Plaintiffs Double Feature: Emery Celli Moves to Withdraw in New York Discovery Case’; ‘Patton Boggs Accuses Gibson Dunn of Tortious Interference’; ‘Very Different Responses: Firms Repping Chevron Plaintiffs Offer Up Double Feature Corporate Counsel’, The American Lawyer (Online) 9 February 2011, . 127  Apart from violation of local ethical rules, States have also shown some willingness to impose criminal sanctions on foreign attorneys who violate local criminal laws. For example, taking of a deposition is a common practice in the United States, but is considered unethical and illegal in many other countries, such as Brazil. According to the US Department of State: ‘The Government of Brazil asserts that, under Brazilian Constitutional Law, only Brazilian judicial authorities are competent to perform acts of a judicial nature in Brazil. Brazil has advised it would deem taking depositions in Brazil by foreign persons to be a violation of Brazil’s judicial sovereignty. Such action potentially could result in the arrest, detention, expulsion, or deportation of the American attorney or other American participants.’ US Dep’t of State, Brazil Judicial Assistance, . 121 122

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From an Invisible College to an Ethical No-Man’s Land parties as part of their case strategy. According to anecdotal reports, this technique appears to be on the rise also in international arbitration, as parties and counsel are reportedly responding to ethical conflicts within arbitral proceedings by petitioning national bar authorities for disciplinary action against allegedly offending attorneys. 1.58 These developments suggest that ethical conflicts in international arbitration may be more

likely to be raised in national contexts. Relatedly, there is an increased potential for national legal systems being pressed to become more active regulators of attorney conduct in international arbitration. One problem with these developments, however, is that recourse for ethical misconduct is only available through some national bar authorities. Even today, as in the era of Bhopal, apart from a few active jurisdictions, national bar rules and disciplinary authority often do not apply to conduct that occurs abroad or in international arbitral proceedings. This book argues that national authorities are not efficient or effective regulators for conduct in international arbitration. Nevertheless, national regulation of transnational legal practice is an important backdrop for understanding ethical regulation in international arbitration, and support from national bar authorities will be essential for self-regulation in international arbitration. 1.  National regulation of transnational legal practice

1.59 Perhaps the most significant marker of the globalization of the legal profession is that today

many local bar authorities expressly allow foreign attorneys to conduct legal activities in their jurisdiction. This authorization is almost always conditioned on the requirement that they ‘register’ as foreign attorneys or ‘foreign legal consultants’.128 Many jurisdictions also require that they affiliate with locally licensed attorneys. In this status, foreign legal consultants are subject to regulation as local attorneys. They are usually precluded, however, from advising on local law—often very broadly defined129—or appearing in local courts.130 One exception is the European Union, which has developed very broad opportunities for cross-border practice among lawyers from other European Member States.131

1.60 At the other end of the spectrum, there are some holdouts that have resisted opening

their legal markets. To varying degrees, Korea, Japan, China, and India have offered considerable resistance to penetration by US and UK firms,132 with India being the most   Laurel S. Terry et al., ‘Transnational Legal Practice 2009’, 44 Int’l Law. 563, 569 (2009).   For example, in Hong Kong, ‘practice of law’ is defined broadly enough to include ‘provid[ing] general guidance as to what foreign lawyers and firms may not do’ and any activity that ‘can properly be regarded as a service customarily provided by a solicitor in his capacity as such’. Darryl D. Chiang, ‘Foreign Lawyer Provisions in Hong Kong and the Republic of China on Taiwan’, 13 UCLA Pac. Basin L.J. 306, 328–9 (1995) (citing Foreign Lawyers Registration Rules, (1994) Cap. 159 vol. 2, ch. 8, § 12 (H.K.)). 130  These limitations most likely provide the regulatory counterpart to the empirical phenomenon observed by Professor Silver and her colleagues. An office in another country would not be of much benefit to a US or UK firm if it were staffed with foreign attorneys who were legally precluded from engaging in any work that implicated local law or legal institutions. Glocalization, in other words, is intricately intertwined with the restrictions imposed on cross-border legal practice. 131  Laurel S. Terry, ‘An Introduction to the European Community’s Legal Ethics Code Part II: Applying the CCBE Code of Conduct’, 7 Geo. J. Legal Ethics 345 (1993); Laurel S. Terry, ‘An Introduction to the European Community’s Legal Ethics Code Part I: An Analysis of the CCBE Code of Conduct’, 7 Geo. J. Legal Ethics 1 (1993). 132  For an in-depth analysis of the development of the legal profession in China, see Ethan Michaelson, Unhooking from the State: Chinese Lawyers in Transition (2003). With regard to other dimensions of the globalization of law practice, see Jayanth K. Krishnan, ‘Globetrotting Law Firms’, 23 Geo. J. Legal Ethics 57, 87 (2010) (‘India has no choice but to resist infiltration by UK law firms because they believe the UK has ulterior motives 128 129

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Regulation of transnational law practice extreme example. These holdouts have only been partially successful since foreign investment almost necessarily presumes legal services by foreign and international law firms.133 They are also coming under increasing pressure from international trade organizations and agreements to open up to foreign lawyers.134 The pressure, however, also comes with some reciprocal concessions.135 The United States is yielding, albeit slowly and partially, to this pressure by allowing foreign lawyers greater access to US legal markets.136 Whatever advances have been made in allowing and regulating in-bound foreign attorneys, 1.61 no national legal system has regulated their own ‘out-bound’ lawyers with the same vigour. A cynic might hypothesize that this regulatory reluctance is simply a form of protectionism for local attorneys, or at least a disregard for misconduct that imposes costs in foreign legal systems but does not affect local legal markets. Without completely ruling out the more cynical view, the limited institutional capabilities 1.62 of national bar authorities are also inevitably part of the explanation for limited concern over the foreign conduct of locally licensed attorneys. As noted, even in domestic contexts, there are serious questions about the effectiveness of discipline and sanctions by bar authorities.137 The institutional limitations that give rise to this critique are amplified in transnational and international contexts. Territoriality is the primary basis for political entities to exercise prescriptive jurisdiction. 1.63 In the context of lawyer regulation, the concept of territoriality has traditionally been used

similar to the British East India Company from the seventeenth century.’); Bruce E. Aronson, ‘The Brave New World of Lawyers in Japan: Proceedings of a Panel Discussion on the Growth of Corporate Law Firms and the Role of Lawyers in Japan’, 21 Colum. J. Asian L. 45, 52–53 (2007) (the Japanese bar association has historically resisted integration of foreign attorneys, but pressure from trade negotiations with the United States resulted in licensing of foreign attorneys). 133   Even in China, where a strong Central Government has asserted itself in most industries, regulation of transnational legal practice remains ambiguous, and limitations on foreign firms are apparently underenforced. See Sida Liu, ‘Globalization as Boundary-Blurring: International and Local Law Firms in China’s Corporate Law Market’, 42 Law & Soc’y Rev. 771 (2007). This lax regulatory enforcement has allegedly led to ‘backdoor’ legal activities by foreign attorneys, raising the hackles of local Chinese attorneys who complain that foreign firms were improperly impinging on business that would otherwise go to local lawyers. See Anthony Lin, ‘Shanghai Bar Association Goes after Foreign Firms’, N.Y. L. J., 16 May 2006, . See A. Shankar, ‘Madras HC issues notice in PIL seeking action against foreign law firms’, Law et al. News, 20 Mar. 2010. Similarly, long after the Bhopal case, foreign attorneys apparently continue to come into India on tourist visas, which many Indian attorneys claim violate the restrictions of the Advocates Act of 1961. According to Indian lawyers, who filed a public interest lawsuit in protest, ‘32 law firms . . . are clandestinely operating in India’. See A. Shankar, ‘Madras HC issues notice in PIL seeking action against foreign law firms’, Law et al. News, 20 Mar. 2010. 134  Misasha Suzuki, ‘The Protectionist Bar Against Foreign Lawyers in Japan, China, and Korea: Domestic Control in the Face of Internationalization’, 16 Colum. J. Asian L. 385 (2003). 135  Markets for legal services are a significant trade issue, and remain one of the few areas in which the United States enjoys a significant trade surplus. ‘The US Department of Commerce Bureau of Economic Analysis estimates that the export of legal services from the United States generated $4.3 billion in receipts in 2005, while imports of legal services were valued at $914 million, yielding a 4:1 surplus for balance-of-payment accounts. According to the UK Department of Constitutional Affairs, British law firms generated £1.9 billion in exports in 2003, compared to £1.5 billion in imports.’ Laurel S. Terry et al., ‘Transnational Legal Practice: 2006–07 Year-in-Review’, 42 Int’l L. 833, 834 (2008). 136  See Laurel S. Terry, ‘The Legal World Is Flat: Globalization and Its Effect on Lawyers Practicing in Non-Global Law Firms’, 28 Nw. J. Int’l L. & Bus. 527, 529 (2008) (‘[B]‌etween 1993 and 2003, US exports of legal services grew 134%, but imports grew 174%.’). 137  See paras 1.67–1.68.

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From an Invisible College to an Ethical No-Man’s Land to determine who ‘can regulate the conduct of persons who appear in . . . courts, maintain [professional] offices, or conduct other transactions within [a given] territory’.138 While strict conceptions of territoriality are no longer regarded as a limitation on the exercise of regulatory jurisdiction by political branches,139 attorneys are not generally regulated by political entities. 1.64 Local bar associations and law societies, most often in conjunction with local courts, are the

primary promulgators and enforcers of professional ethics in most national legal systems.140 These bar authorities often compete for jurisdiction with the bar authorities of other political sub-divisions within the same polity.141 In Continental Europe, local bar associations were historically limited to particular cities or minor political subdivisions. In the United States, bar authorities continue to operate at the state level. Competition among state bars has blocked pragmatic efforts to develop national licensing and regulation.142 This competition among other local bar authorities within a national polity creates what might be called ‘horizontal’ pressure on their exercise of regulatory power.

1.65 In addition to ‘horizontal’ pressure from competing national bar authorities, other politi-

cal entities are also encroaching ‘vertically’ on the power of bar authorities.143 In the United States and Europe, and to a somewhat lesser degree in other jurisdictions, there has been a virtual explosion of auxiliary regulation aimed at attorneys. These regulations are enacted through national legislation, administrative regulations, judicially created rules (including liability rules), and international agreements. They aim at controlling various 138  Vagts, ‘Professional Responsibility in Transborder Practice’, 689. The second most prevalent basis for jurisdiction is nationality of the attorneys, or in the case of bar organizations, membership. See Vagts, ‘Professional Responsibility in Transborder Practice’, 689–90 (citing Restatement (Third) Foreign Relations Law § 402(2) (1987)). 139   See Hannah L. Buxbaum, ‘Transnational Regulatory Litigation’, 46 Va. J. Int’l L. 251, 273–80 (2006); Kal Raustiala, ‘The Geography of Justice’, 73 Fordham L. Rev. 2501, 2514–17 (2005). 140   For instance, in France, each of the 180 local bars except for the very smallest has one or more Deontology Committees, which are composed of elected members of the local bar and have power to promulgate the bar’s ethical regulations (Réglement Intérieur) and recommend avocats to the local Council (Conseil de l’Ordre) for disciplinary proceedings. The Council is the only organ that has the power to sanction members for violations of rules of conduct. See Loi n° 2004-130 du 11 février 2004 réformant le statut de certaines professions judiciaires ou juridiques, des experts judiciaires, des conseils en propriété industrielle et des experts en ventes aux enchères publiques [Act No. 2004-130 of 11 Feb. 2004 reforming the status of certain judicial and legal professions, legal experts, the patent attorneys and experts in public auctions]; Loi n° 71-1130 du 31 décembre 1971 portant réforme de certaines professions judiciaires et juridiques [Law No. 71-1130 of 31 Dec. 1971 on reforming certain judicial and legal professions] arts. 17 and 22; John Leubsdorf, Man in His Original Dignity: Legal Ethics in France (2001) 2; Christina Dadomo and Susan Farran (eds.), The French Legal System 2nd edn. (Sweet & Maxwell,1996) 119–120. 141  Regulation of the legal profession ‘remains local in both scope and administration, often providing little guidance’. Ronald A. Brand, ‘Professional Responsibility in a Transnational Transactions Practice’, 17 J.L. & Comm. 301, 302–03 (1998). 142  See Eli Wald, ‘Federalizing Legal Ethics, Nationalizing Law Practice, and the Future of the American Legal Profession in a Global Age’, 48 San Diego L. Rev. 489 (2011); see William T. Barker, ‘Extra-jurisdictional Practice by Lawyers’, 56 Bus. Law. 1501 (2001). 143  Historically, most States permitted some form of professional independence. For example, eighteenthcentury Prussia did not, despite significant efforts, absorb advocates completely into the civil service machinery. See Dietrich Rueschemeyer, ‘Comparing Legal Professions Cross-Nationally: From a Professions-Centered to a State-Centered Approach’, 11 Am. B. Found. Res. J. 415, 445 (1986). Similarly, the former Soviet Union made unique allowances for attorneys to work as self-employed professionals in cooperative colleges, a privilege denied to virtually all other commercial sectors, even if allowances for attorneys were more rhetorical than actual. See Lawrence M. Friedman and Zigurds L. Zile, ‘Soviet Legal Profession: Recent Developments in Law and Practice’, 1964 Wis. L. Rev. 32 (1964). More recently, the proliferation of laws that indirectly regulate attorneys have raised questions about what self-regulation really means. See, e.g., Fred C. Zacharias, ‘The Myth of Self-Regulation’, 93 Minn. L. Rev. 1147 (2009).

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Regulation of transnational law practice activities including money laundering, corruption, terrorism, tax evasion, and trade in legal services.144 Their effect, however, is to erode the foundations of attorneys’ professional self-regulation.145 As a result, bar authorities—particularly in the United States—are in an increasingly limited and more defensive posture.146 In light of these horizontal and vertical constraints on bar authorities, their reluctance to assert a new measure of regulatory power extraterritorially may be understood as a pragmatic retrenchment in the face of eroding authority.147 Recent reforms in a few jurisdictions have expressly extended extraterritorially the powers of 1.66 some local bar authorities, and have introduced related choice-of-law guidance for ethical rules. Instead of opening a new globalized role for bar authorities to accord with globalization of the legal profession, however, in practice these developments emphasize the institutional limitations of bar authorities in a globalized legal world. Even in their purely domestic activities, bar authorities are often underfunded and under- 1.67 staffed.148 They are also generally staffed with individuals who have little or no knowledge or expertise of international or foreign law practice, let alone foreign language competences. Investigating conduct that occurred in a foreign jurisdiction, in violation of foreign ethical rules, and in all probability occurred in a foreign language would stretch the competence of most national bar authorities.149 The limited institutional competences of national bar authorities suggest that they are not 1.68 the optimal choice as the sole, or even primary, source of ethical regulation for attorneys or

144   For an overview of these developments at the international level, see Terry et al., ‘Transnational Legal Practice’. 145   In many jurisdictions, self-regulation is not part of the local tradition. Instead, ethical rules are promulgated through legislative enactment, even if supplemented by ancillary enforcement mechanisms. For example, in Thailand, China, Egypt, and Turkey the content attorney ethical rules are delineated by statute. In other jurisdictions, such as Chile, ethical rules are written by professional guilds, but those guilds are voluntary organizations that can exclude members, but which have no formal regulatory power since membership is not required for law practice. 146   Ted Schneyer, ‘An Interpretation of Recent Developments in the Regulation of Law Practice’, 30 Okla. City U. L. Rev. 559, 559–610, 569–70 (2005) (arguing that bar associations ‘continue, often with ABA support, to resist federal “intrusions” ’ but conceding that ‘they must increasingly content themselves with trying to influence, rather than staving off, federal initiatives’); Fred C. Zacharias, ‘The Myth of Self-Regulation’, 93 Minn. L. Rev. 1147 (2009) (arguing that there are costs to falsely regarding ‘disciplinary codes as mere professional self-regulation rather than as one element of an expansive regulatory regime governing the bar’); John Leubsdorf, ‘Legal Ethics Falls Apart’, 57 Buff. L. Rev. 959, 961 (2009) (arguing that the ideal of attorney self-regulation has been almost entirely eroded in England). This phenomenon is also occurring in Canada, England, Australia, and with European regulation. 147  Informal research and anecdotal accounts suggest that most bar authorities do not regard themselves as having extraterritorial power. See, e.g., ‘20th Annual Workshop of the Institute for Transnational Arbitration: Confronting Ethical Issues in International Arbitration’, 3:3 World Arb. & Mediation Rev. 363–64 (2009) (‘[T]‌here is a parochial view . . . that [Argentinean lawyers] are not prepared at this time to extend to lawyers practicing abroad our rules because [Argentinean lawyers] do not feel we have jurisdiction.’). 148  See Ronald J. Daniels and Michael Trebilcock, ‘The Political Economy of Rule of Law Reform in Developing Countries’, 26 Mich. J. Int’l L. 99, 125 (2004) (discussing the lack of resources of Latin American bar associations); Susan P. Koniak, ‘Corporate Fraud: See, Lawyers’, 26 Harv. J.L. & Pub. Pol’y 195, 215 (2003) (discussing the inability of underfunded and understaffed bar authorities to regulate lawyers assisting securities and other types of fraud); Quintin Johnstone, ‘Bar Associations: Policies and Performance’, 15 Yale L. & Pol’y Rev. 193, 199 (1996) (‘In comparison to large business corporations and many government agencies, the major comprehensive bar associations’ financial resources are limited.’). 149  In fact, the few examples of investigation of attorney misconduct in the United States have been through the courts, in connection with parallel cases that are pending.

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From an Invisible College to an Ethical No-Man’s Land arbitrators150 in international arbitration. Many ethical issues ‘generated by the global context’ are ‘not easily amenable to resolution by reference to any single code within the “home” or “host” jurisdiction’.151 For this reason, commentators have argued that the ‘common expectation of regulatory control exercised by a professional bar may [need to] be replaced’ by a mechanism or combination of mechanisms more adapted to modern global realities.152 While there have been some preliminary efforts to date, they have been limited in both aim and effect. 2.  Efforts at international regulation of transnational legal practice 1.69 In response to the limitations of national bar authorities, one obvious effort has been to

provide guidance for international and transnational practice through international codes of ethics. There have been literally dozens of attempts, but most fall short of providing clear guidance and none even attempt to create transnational mechanisms for enforcement.153 The earliest effort was the 1956 IBA International Code of Legal Ethics. In 1977, the CCBE promulgated the Declaration of Perugia on the Principles of Professional Conduct.154 While both these efforts were remarkable for their prescience (they were adopted when national written codes of ethics were still a new and rare phenomenon), they are most accurately described as expressing notions of professionalism rather than meaningful ethical guidance.155

1.70 More recent efforts include the IBA ‘Core Values’ Resolution, which began in 1998, and the

IBA General Principles of the Legal Profession of 2011, which includes recently updated and more detailed commentary.156 The Bar Association Presidents’ Meeting developed in 2005 a Statement of Core Principles, which was adopted by 100 bar associations from around the world, and the Union Internationale des Avocats (UIA) developed the Turin Principles in 2002.157

150  Although it may seem strange to talk about bar associations regulating arbitrators, there are some bar authorities that already do or are contemplating direct regulation of arbitrators who are licensed as attorneys. For example, Article 55 of the Italian Codice Deontologico Forense specifically requires, among other things, that Italian lawyers who serve as arbitrators remain independent, disclose certain information about relevant contacts, and preserve the trust parties have placed in them. Similarly, in the United States, there is a new proposed Model Rule for Lawyers Acting as Third Party Neutrals, which if enacted would become part of the Model Rules. See CPR-Georgetown Commission on Ethics and Standards of Practice in ADR, Model Rules for the Lawyer as Third-Party Neutral (2002), . 151   See Etherington and Lee, ‘Ethical Codes and Cultural Context’, 97. 152   See Etherington and Lee, ‘Ethical Codes and Cultural Context’. Problems with national regulatory authorities enforcing international or foreign ethical rules are explored in greater detail in Chapter 3. 153   Catherine A. Rogers, ‘Fit and Function in Legal Ethics: Developing a Code of Conduct for International Arbitration’, 23 Mich. J. Int’l L. 341, 396 (2002); M. McCary, ‘Bridging Ethical Borders: International Legal Ethics with an Islamic Perspective’, 35 Tex.Int’l L.J. 289, 294 (2000). 154   See The Declaration on the Principles of Professional Conduct of the Bars and Law Societies of the European Community (1977) [hereinafter Declaration of Perugia]. The Perugia Principles contained only ‘eight brief ethical pronouncements’, which have been described as an obscure ‘discourse on the function of a lawyer in society’ and ‘the nature of the rules of professional conduct’. See Mary C. Daly, ‘The Dichotomy Between Standards and Rules: A New Way of Understanding the Differences in Perceptions of Lawyer Codes of Conduct by US and Foreign Lawyers’, 32 Vand. J. Transnat’l L. 1117, 1159 (1999). 155  See Etherington and Lee, ‘Ethical Codes and Cultural Context’, 97. 156  The IBA International Principles on Conduct for the Legal Profession was adopted by the IBA on 28 May 2011. International Bar Association, . 157  For a detailed survey of reform efforts to date, see Laurel S. Terry, ‘A “How To” Guide for Incorporating Global and Comparative Perspectives into the Required Professional Responsibility Course’, 51 St. Louis U. L.J. 1135, 1153 (2007).

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Regulation of attorneys in international arbitration While all laudable efforts,158 most operate at a level of abstraction that again provides little meaningful guidance to the most salient issues that arise in actual international arbitral practice.159 Most recently, other international efforts have developed a more tailored focus. The CCBE 1.71 developed the Code of Conduct in 1988 (later revised in 2006), which governs European lawyers.160 The CCBE Code was specifically drafted to provide guidance to attorneys engaged in cross-border activities in Europe and is arguably the most advanced and successful international code of ethics to date.161 Even if much more overtly aimed at addressing regulatory issues than stating general aspirational principles (like those efforts described previously), the CCBE still does not address a number of the most difficult questions that arise in the regulation of cross-border practice. Most importantly, the CCBE Code does not resolve conflicts between different national ethical regimes that might both apply to particular attorney conduct; it only suggests that attorneys inform themselves about the rules of other Member State jurisdictions.162 One feature all these efforts have in common is that they fail to address specific ethical issues 1.72 that are most critical in practice before international tribunals. This omission is interesting because most early regulation of legal professions had a reverse focus—most early codes focused primarily, if not exclusively, on an attorney’s role as advocate and conduct before tribunals. As explained in more detail in later chapters, the absence of rules regarding practice before international tribunals is most likely an implicit nod to the generally recognized notion that tribunals must develop their own rules specially tailored to their proceedings.163

E.  Regulation of attorneys in international arbitration Advocacy before tribunals is universally assumed to require specialized rules that are par- 1.73 ticular to the relevant tribunal and cannot be developed independently of that tribunal. This assumption is expressed in various efforts that provide guidance for transnational legal practice, but leave room for the ethical rules of an international tribunal to govern conduct before it. For example, Article 2.5 of the IBA General Principles of the Legal Profession of 158  For example, the Statement of Core Principles provides such broad admonitions as: ‘An independent legal profession, without which there is no rule of law or freedom for the people.’ While obviously an important principle, absent a meaningful definition of what constitutes ‘independent’ or ‘rule of law’, the general principle provides little meaningful guidance. 159  Andrew Boon and John Flood, ‘Globalization of Professional Ethics? The Significance of Lawyers’ International Codes of Conduct’, 2 Legal Ethics 29, 55–56 (1999) (arguing that the absence of discourse about the international codes is a barrier to the globalization of professional ethics); H.W. Arthurs, ‘A Global Code of Ethics for the Transnational Legal Field’, 2 Legal Ethics 59 (1999) (discussing the difficulties of creating a universal or global code of ethics and criticizing such codes as ineffective). 160  Charter of Core Principles of the European Legal Profession and Code of Conduct for European Lawyers (2006), [CCBE Code of Conduct], . 161  Laurel S. Terry, ‘An Introduction to the European Community’s Legal Ethics Code Part I: An Analysis of the CCBE Code of Conduct’, 36–37. 162  Article 2.4 of the CCBE Code of Conduct provides: ‘When practising cross-border, a lawyer from another Member State may be bound to comply with the professional rules of the Host Member State. Lawyers have a duty to inform themselves as to the rules which will affect them in the performance of any particular activity.’ 163  See paras 3.23–3.29. The omission, particularly from earlier codes, may also reflect the fact that the proliferation of international tribunals is a relatively new development.

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From an Invisible College to an Ethical No-Man’s Land 2011 states, ‘A lawyer who appears before or becomes otherwise engaged with a court or tribunal must comply with the rules applied by such court or tribunal.’ In the same vein, Article 4.1 of the CCBE Code provides ‘A lawyer who appears, or takes part in a case, before a court or tribunal must comply with the rules of conduct applied before that court or tribunal.’ Similarly, Model Rule 8.5 in the United States instructs that an attorney is bound by the rules of a tribunal or, in the absence of such rules, the ethical rules of the ‘jurisdiction in which the tribunal sits’.164 The underlying assumption of each of these approaches is that tribunals generally have their own rules. The problem with international arbitral tribunals is that they do not.165 1.74 Recognizing this gap, two more recent efforts have attempted to fill it. On the one hand, the

International Law Association Study Group on the Practice and Procedure of International Courts and Tribunals drafted the Hague Principles on Ethical Standards for Counsel Appearing before International Courts and Tribunals (Hague Principles).166 The Hague Principles are an ‘attempt to articulate common ethical standards for counsel for all international courts’.167 Notably, however, the Hague Principles expressly disavow application in commercial arbitration.168 In addition, while attempting to provide general guidance, the Hague Principles appear to contemplate that they will be supplemented by rules specifically promulgated by individual tribunals.169

1.75 In another important effort, an International Bar Association Task Force has recently drafted

proposed Guidelines on Party Representation in International Arbitration. These Guidelines

164   The full text of Rule 8.5 is as follows: ‘(a) Disciplinary Authority. A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer’s conduct occurs. A lawyer not admitted in this jurisdiction is also subject to the disciplinary authority of this jurisdiction if the lawyer provides or offers to provide any legal services in this jurisdiction. A lawyer may be subject to the disciplinary authority of both this jurisdiction and another jurisdiction for the same conduct. (b) Choice of Law. In any exercise of the disciplinary authority of this jurisdiction, the rules of professional conduct to be applied shall be as follows: (1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and (2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.’ As analysed in greater detail in Chapter 9, this rule is problematic as applied to international arbitration because the jurisdiction in which a tribunal sits is often unrelated to the underlying dispute. Moreover, as described in the pages that follow, the ethical rules of most jurisdictions do not regard their rules as applying to foreign counsel in locally seated international arbitrations. See also Chapter 9. 165  See Ucheora Onwuamaegbu, Panel on International Arbitration of Investment/Contract Dispute, ‘Is There a Need for Guidelines for Counsel Participation in International Arbitration?’, State Bar of Texas International Law Section’s 21st Annual International Law Institute, 6 Mar. 2009, p. 2 (‘Neither the ICSID Rules nor those of UNCITRAL . . . provide any guidelines for the participation of representatives of parties in proceedings, including provisions on disclosures or possible disqualification.’). 166 Available at . 167  Arman Sarvarian, ‘Common Ethical Standards for Counsel Before the European Court of Justice and European Court of Human Rights’, 23 Eur. J. Int’l L. 991, 992 (2012). 168  According to Principle 1.2, the Hague Principles only apply to ‘an international arbitral tribunal in a proceeding in which one or more of the parties is a state’. This definition would include investor-State arbitration, but not international commercial arbitration, unless it included a State party. 169  The ILA Principles recognize in precatory language ‘that each international court and tribunal has its own characteristics and functions and that each international court may need to adapt principles to fit its particular circumstances and practices’. For example, Principle 6.2 states that counsel may engage in pre-testimonial communication with a witness, but ‘subject to such rules as the international court or tribunal may have adopted’.

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Regulation of attorneys in international arbitration are an important milestone in the development of ethical regulation for international arbitration. As important as they are, the Guidelines for Party Representation are not formally binding, seek to leave so-called manadatory national rules in place, and leave open essential questions about how they can be meaningfully enforced. As such, by their own terms, the Guidelines on Party Representation do not seek to displace otherwise applicable national rules.170 Despite these recent advances, counsel ethics in international arbitration continues to be 1.76 more or less a no-man’s land. This status is not entirely accidental. The ethical void is at least in part by design. There are two main, inter-related factors that inspire this design. First, even if not required by the New York Convention, there is a generally acknowledged right to be represented by counsel chosen by a party. Initially this right was recognized at the international level only for criminal defendants.171 That basic procedural right eventually translated into non-criminal contexts,172 and from there into international arbitration contexts.173 For example, the English Arbitration Act of 1996 provides that ‘[u]‌nless otherwise agreed by the parties, a party to arbitral proceedings may be represented in the proceedings by a lawyer or other person chosen by him’.174 This first premise about the right to counsel of a party’s own choosing creates a second 1.77 dynamic. To allow parties maximum flexibility in choosing counsel, most jurisdictions effectively exempt foreign attorneys appearing in locally seated international arbitrations from regulations that otherwise apply to foreign attorneys. This exemption effectively leaves attorneys in international arbitration unregulated since, as noted previously, most bar associations do not expressly or practically extend their regulatory efforts extraterritorially.175 This Section explores these two aspects of regulation of attorneys in international arbitration. 1.  Jurisdictions that seek to attract international arbitration States compete, often vigorously, to attract international arbitration business.176 Limiting 1.78 or precluding foreign attorneys from appearing as counsel in international arbitrations can   The IBA Guidelines for Party Representation are analysed in greater detail in Chapters 3 and 6.   The international concept of ‘counsel of choice’ began as a political right that should be guaranteed to criminal defendants. See International Covenant on Civil and Political Rights, G.A. Res. 2200A (XXI), U.N. GAOR, Supp. Np. 16 (Vol. 21), U.N. Doc. A/RES/2200A(XXI), at 14(3)(d) (16 Dec. 1966). It has subsequently been recognized more generally as a feature of procedural fairness in any adjudicatory proceeding. 172  For example, the International Court of Justice website explains that ‘there is no special International Court of Justice Bar, there are no conditions that have to be fulfilled for counsel or advocates to enjoy the right of arguing before it except only that they must have been appointed by a government to do so’. See International Court of Justice, How the Court Works, . 173  In re Certain Solder Joint Pressure Pipe Fittings, CDA-USA-98-1904-03, 2000 WL 1125288 (NAFTA Binat Panel 3 Apr. 2000) (dismissing a motion to disqualify a non-lawyer from acting as counsel of record for one of the parties to the review, noting that ‘. . . parties are entitled to be represented by counsel, . . . and to be represented by counsel of choice. The Tribunal regularly permits parties to be represented by persons other than lawyers, such as trade consultants, economists and accountants’); Charles N. Brower and Stephan W. Schill, ‘Regulating Counsel Conduct Before International Arbitral Tribunals’, in Bekker et al. (eds.), Making Transnational Law Work in a Global Economy: Essays in Honour of Detlev Vagts (2010) 488, 505–06. 174  Arbitration Act, (1996) § 36 (UK). 175  See paras 1.65–1.68, and accompanying text. 176 William W. Park, ‘National Law and Commercial Justice: Safeguarding Procedural Integrity in International Arbitration’, 63 Tul. L. Rev. 647, 680 (1989) (documenting a ‘scramble among Western European nations’ to compete for international arbitration business); Sir Michael J. Mustill, ‘Arbitration: History and Background’, 53 (‘[O]‌ne must take note of the efforts made by individual nations to make their arbitration laws . . . more attractive.’). 170 171

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From an Invisible College to an Ethical No-Man’s Land force parties to retain different (i.e., local counsel) that would not otherwise be necessary. As a result, such requirements on foreign counsel are regarded as an act of hostility against international arbitration and can make a jurisdiction less competitive in attracting arbitration business. Singapore provides a vivid example. 1.79 In the highly publicized case of Turner (East Asia) Pte. Ltd v Builders Federal (Hong Kong)

Ltd,177 the Supreme Court of Singapore affirmed an injunction prohibiting the US-based law firm of Debevoise & Plimpton from appearing in international arbitration proceedings seated in Singapore. The court, applying a broad statutory definition of ‘practice of law,’ reasoned that representation in an international arbitration is ‘an act of an advocate or solicitor when it is customarily (whether by history or tradition) within his exclusive function to provide’.178 In response to this decision, ‘most lawyers and businesspeople began avoiding Singapore as an arbitration venue’ and ‘writing Singapore out of arbitration clauses’.179 As a result, ‘Singapore’s arbitration business dropped precipitously, going to Kuala Lumpur and Hong Kong instead’.180

1.80 In the years since Turner, the Singaporean legislature has attempted to ameliorate the

situation through two amendments to the Singapore Legal Profession Act. A July 1992 amendment clarified that Sections 32 and 33 of the Act ‘shall not extend to . . . arbitration proceedings seated in Singapore in which foreign law governs’.181 A 2004 amendment repealed Section 35 of the Act to allow foreign lawyers to give advice, prepare documents, and provide assistance in all Singapore arbitration proceedings.182 Effectively, arbitration counsel and arbitrators are now permitted a ‘fly-in–fly-out’ option to participate in locally seated international arbitrations. The happy ending to this cautionary tale is that, after ensuring that arbitration was open to foreign counsel, ‘Singapore [has] clearly emerge[d]‌as the most popular Asian seat’.183

1.81 Japan provides another interesting example of changes in professional regulation to accom-

modate international arbitration. Historically, Japan has imposed both widely applicable and extremely restrictive policies on foreign lawyers.184 In 1996, however, it passed a law

  See Turner (East Asia) Pte. Ltd v Builders Fed. (H.K.) Ltd, (1988) 2 MLJ 280 (Sing.).   Turner (East Asia) Pte. Ltd v Builders Fed. (H.K.) Ltd, 280. 179  Chiang, ‘Foreign Lawyer Provisions in Hong Kong and the Republic of China on Taiwan’, 329 n. 114; David W. Rivkin, ‘Restrictions on Foreign Counsel in International Arbitrations’, XVI Y.B. Comm. Arb. 402, 403–07 (1991). 180 Chiang, ‘Foreign Lawyer Provisions in Hong Kong and the Republic of China on Taiwan’, 329 n. 114. 181  Statutes of the Republic of Singapore, Legal Profession Act (Cap. 161) § 34A(1)(a) (1994). Michael A. Polkinghorne, ‘More Changes in Singapore: Appearance Rights of Foreign Counsel’, 22 J. Int’l Arb. 75, 75 (2005); Chiang, ‘Foreign Lawyer Provisions in Hong Kong and the Republic of China on Taiwan’, 329 n. 114; Michael A. Polkinghorne, Note, ‘The Right of Representation in a Foreign Venue’, 4 Arb. Int’l 333, 334–37 (1988). 182  Polkinghorne, ‘More Changes in Singapore: Appearance Rights of Foreign Counsel’, 76. 183  2010 International Arbitration Survey: Choices in International Arbitration, Sch. of Int’l Arb., Queen Mary University of London (2010), 20, . The Survey also attributes the rising success of Singapore to promotional activities and active involvement of more arbitral institutions. Presumably, these latter developments would not have had much traction were it not for the opening up of international arbitration matters in Singapore to foreign lawyers. 184  Tadao Fukuhara, ‘The Status of Foreign Lawyers in Japan’, 17 Jap. Ann. Int’l L. 21 (1973), in Hideo Tanaka (ed.), The Japanese Legal System: Introductory Cases and Materials (1976) 591, 591–607; Chan, KayWah, Lawyers in Japan: A Profession Caught in the Current of Reforms (2–5 June 2005) (paper presented at the annual meeting of The Law and Society, J.W. Marriott Resort, Las Vegas, NV). 177 178

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Regulation of attorneys in international arbitration permitting foreign attorneys to act as representatives in international arbitrations.185 As a consequence, international arbitration is the only legal activity in which foreign lawyers are permitted to engage in Japan.186 To illustrate just how welcoming Japan is for international arbitration, it has also created special immigration status for foreign attorneys entering for the purpose of engaging in activities related to international arbitration. Previously, this type of visa was reserved to domestic workers serving foreign diplomats or consular representatives, amateur athletes, and volunteer workers.187 Not to be outdone, several individual states within the United States are vying to make them- 1.82 selves a more attractive venue for international arbitration by permitting foreign counsel. The practice of law in the United States is governed almost entirely by the individual states, and few states have reciprocity regarding professional licensing. As a result, attorneys must generally qualify and be licensed by each individual state in which they engage in legal activities. Against this background, the California Supreme Court in a now infamous 1998 case con- 1.83 cluded that New York counsel appearing in a domestic arbitration in California were engaged in the unauthorized practice of law. The court found them guilty of a criminal misdemeanour, and concluded that they were not entitled to any fees from the relevant representation.188 Although the court also concluded that the prohibition did not apply in international arbitration,189 the decision prompted legislative amendments that do affect international arbitration. The amendments clarified that, while counsel licensed in other US jurisdictions could appear in arbitrations in California, foreign-licensed attorneys could not.190 Because foreign counsel cannot appear to represent their clients, California is often considered an undesirable seat for international arbitration.191The international arbitration community in California is lobbying to reform this legislative misstep, but to date it has not prevailed. Other US jurisdictions, such as New York and Florida, have been more effective at making 1.84 themselves more hospitable to international arbitration.192 New York has determined that

185  Luke Nottage, ‘Japan’s New Arbitration Law: Domestication Reinforcing Internationalisation’, 7 Int’l A.L.R. 54, 55 (2004) (citing The Special Measure Law concerning the Handling of Legal Practice by Foreign Lawyers, promulgated as Law No. 65 of 1996 on 12 June 1996, taking effect on 1 September 1996). 186  See Nottage, ‘Japan’s New Arbitration Law’, 59. Notably, there are efforts to open the Japanese legal market to more foreign attorneys. See Japan Federation of Bar Associations, (2012), 57–64, . 187  Global Business Immigration Handbook § 12:17. 188  Birbrower, Montalbano, Condon & Frank, P.C. v Superior Court, 949 P.2d 1 (Cal. 1998). 189  See Birbrower, Montalbano, Condon & Frank, P.C. v Superior Court, 7. 190  See Cal. Code Civ. Pro.§ 1282.4 (1 Jan. 2011); Cal. R. Ct. (2009), R. 9.43(a) (amended and renumbered effective 1 Jan. 2007, adopted as Rule 983.4 by the Cal. Sup. Ct., effective 1 July 1999). Notably, California imposes relatively strict obligations on attorneys licensed in other states, including an obligation to file a detailed certificate with the State Bar of California and obtain written approval by the arbitral tribunal. See Cal. Code Civ. Pro.§ 1282.4 (a) and (c). Notably, repeat appearances ‘shall be grounds for disapproval and disqualification from serving as an attorney in the arbitration in which the certificate was filed’. See Cal. Code Civ. Pro.§ 1282.4 (d). 191  See David D. Caron and Leah D. Harhay, ‘A Call to Action: Turning the Golden State into a Golden Opportunity for International Arbitration’, 28 Berkeley J. Int’l L. 497 (2010). 192  For instance, in order to improve New York as an attractive forum for international arbitration, the New York State Bar Association (NYSBA) recently created a task force to review New York law as an international standard and the use of New York as a neutral forum for resolving international disputes in arbitration. The task force’s number one recommendation was in support of establishing a permanent Center for International

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From an Invisible College to an Ethical No-Man’s Land representation in arbitration is not the ‘unauthorized practice of law’, such that both out-ofstate and foreign attorneys can readily participate in arbitrations seated in New York without being locally licensed.193 1.85 Florida ethical rules also allow attorneys licensed in other US jurisdictions or foreign juris-

dictions to appear in locally seated arbitrations, but affirm that in doing so, they are bound by Florida ethical rules.194 These were hard-fought changes: The International Law Section of the Florida Bar worked together with many international arbitration practitioners in Florida in 2003 in order to promote the promulgation of rules by the Supreme Court of Florida that clearly allow parties to select counsel of their choice to represent them in international arbitration proceedings conducted in Florida, regardless of whether their counsel of choice is admitted to practice in Florida.195

Florida has since used those legislative developments as a basis for affirmatively advertising itself as an arbitration-friendly jurisdiction. 1.86 This reform is part of a larger effort to ‘establish a strong infrastructure to support and

promote international arbitration in Miami’. According to the website of the Miami International Arbitration Society: [T]‌he State of Florida has enacted targeted legislation and regulations over the course of the last three decades designed to provide a sound and sophisticated legal framework to promote international arbitration in Florida. This legal framework includes . . . progressive rules that permit parties to use their legal counsel of choice to represent them in international arbitration proceedings conducted in Florida, including counsel from a foreign jurisdiction who is not admitted to practice law in Florida.196

Arbitration in New York. See NYSBA, ‘State Bar Association Calls for Creation of a Permanent Center for International Arbitration in New York’ (28 June 2011), ; NYSBA, Final Report of the New York State Bar Association’s Task Force on New York Law in International Matters (18 April 2011), . Florida recently won a bid to host the International Council for Commercial Arbitration (ICCA) biennial international conference, and the Florida legislature recently passed a bill standardizing international arbitration rules based on the UNCITRAL Model Law. See Fla. Stat. Ann. § 684 (West 2010); MIAS Blog, Miami Wins Bid for ICCA 2014 (31 May 2011), ; Santiago A.  Cueto, ‘International Arbitration: Florida Adopts UNCITRAL Model Law, Miami to Benefit the Most’ (20 May 2010), . 193  Committee on Professional Ethics of the Association of the Bar of the City of New York, ‘Recom­ mendation and Report on the Right of Non-New York Lawyers to Represent Parties in International and Interstate Arbitrations Conducted in New York’, 49 Record of the Association of the Bar of the City of New York 47 (1991). 194  See Rules Regulating the Florida Bar, Rule 1-3.11 (c). (Appearances by Non-Florida Lawyer in an Arbitration Proceeding in Florida) (lawyers permitted to appear by this rule shall be subject to these rules regulating the Florida bar while engaged in the permitted representation, including, without limitation, Rule 4-5.5). 195  See Miami International Arbitration Society, ‘Freedom of Choice of Counsel’, . 196  Miami International Arbitration Society, . See also Fl. St. Bar R. 1-3.11 (West 2009): (a) Non-Florida Lawyer Appearing in an Arbitration Proceeding in Florida. A lawyer currently eligible to practice law in another United States jurisdiction or a non-United States jurisdiction may appear in an arbitration proceeding in this jurisdiction if the appearance is: (1) for a client who resides in or has an office in the lawyer’s home state; or (2) where the appearance arises out of or is reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice; and (3) the appearance is not one that requires pro hac vice admission.

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Regulation of attorneys in international arbitration Florida’s approach contrasts with that of New York in that attorneys in Florida-seated arbitrations are bound by local ethical rules, whereas they do not appear to be in New York. A similar approach has been adopted by Korea, which has only recently liberalized its legal 1.87 practice to allow Foreign Legal Consultants. Korea requires that those participating in an international arbitration in Korea be registered as a Foreign Legal Consultant and, as a consequence, makes them subject to both their home ethical rules and those of the Korean Bar Association. This approach by Korea, which is similar to Florida’s in that they both make attorneys in international arbitration subject to local bar rules, is somewhat unique. Most other States do not expressly impose local ethical rules on lawyers who are appearing in locally seated international arbitrations. Instead, by indicating that local licensing is not required, other jurisdictions implicitly exempt foreign attorneys from local ethical rules when appearing in locally seated arbitrations. 2.  Jurisdictions historically hostile to foreign lawyers in international arbitration While most jurisdictions are arbitration-friendly, a few jurisdictions continue to impose 1.88 significant restrictions on foreign lawyers in international arbitration. For example, in Thailand the Working of Aliens Act apparently prohibits foreign attorneys from appearing in arbitration and, at least according to one scholar, ‘if strictly construed’ it would also prohibit the attorney from assisting or advising regarding Thai arbitral proceedings.197 More recent sources suggest that foreign lawyers can appear in international arbitrations as long as Thai law does not govern and Thai courts ‘are not involved in enforcement’.198 Meanwhile, both counsel and arbitrators are advised to obtain work visas in order to enter Thailand199—there is no ‘fly-in–fly-out’ exemption as in Singapore. In Chile, meanwhile, restrictions are even more extreme than the now-defunct Singapore 1.89 limitations. Local law requires Chilean nationality to be licensed as a Chilean lawyer. This provision, combined with a requirement of representation by counsel even in arbitration proceedings has been interpreted by some commentators as precluding foreign lawyers from appearing in locally seated arbitration, even if some ambiguities remain.200 The Thai and Chilean limitations can be significant impediments to international arbitra- 1.90 tions seated in those countries. Somewhat surprisingly, however, these limitations are not very well known, perhaps as a result of the fact that they are under-enforced. As Gary Born observes, they ‘are notable precisely because they are anomalies that deviate from the international norm’.201 Two other jurisdictions, however, are notable also because of their size and 197  Christopher Lau and Christin Horlach, ‘Commentary: Arbitration in Asia? Yes—But Where?’ 23-SPG Int’l L. Practicum 43, 44 (2010); Jahan P. Raissi, Note, ‘Arbitrating in Thailand’, 16 Hastings Int’l & Comp. L. Rev. 99, 119 (1992). (‘The Working of Aliens Act . . . prohibits the business person’s counsel from presenting a case before an arbitral tribunal, and if strictly construed, the business person’s or a company’s own counsel cannot even assist or advise the client regarding Thai arbitral proceedings in general.’) 198 This is an opinion in a still-evolving survey apparently being conducted by the International Bar Association. Thailand International Trade in Legal Services, . It is ambiguous what enforcement in Thai courts necessarily means, particularly since in many cases the place of enforcement may not be well-settled when arbitral proceedings are commenced. 199  See Lau and Horlach, ‘Commentary: Arbitration in Asia? Yes—But Where?’, 44. 200 Dyalá Jimenez-Figueres and Angie Armer Ros, ‘Notes on the New Chilean Law on International Arbitration’, 20-7 Mealey’s Int’l Arb. Rep. News Brief 13, 25–26 (2005) (suggesting that ‘parties to an arbitration in Chile should include Chilean counsel in their representation as a matter of caution’). 201  See Born, International Commercial Arbitration (2014) 2914.

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From an Invisible College to an Ethical No-Man’s Land importance to global markets and related international disputes. China and India remain the two most important jurisdictions that restrict lawyers’ practice with respect to international arbitrations in their territories. 1.91 China is the most important jurisdiction that restricts representation in international arbitra-

tion. China is home to the China International Economic and Trade Arbitration Commission (CIETAC), the arbitral institution with the largest caseload, at least in terms of number of cases.202 China prohibits foreign attorneys from issuing any opinions or evaluations of Chinese law in international arbitrations.203 According to some commentators, it may also prohibit foreign attorneys from representing parties in CIETAC arbitrations, or at least not without co-representation with a Chinese attorney.204 To the extent a Chinese attorney is required to participate, that attorney could not be a member of the same foreign firm because Chinese attorneys are only permitted to practice in Chinese firms, and those who affiliate with a foreign firm must forsake their Chinese licence.205 This rule effectively requires parties to an arbitration that is seated in China or in which Chinese law may apply to retain a Chinese law firm to appear as co-counsel, or risk imposition of sanctions.206

1.92 If the application of Chinese law to foreign firms has some ambiguities, Indian law has until

very recently been quite clear—they are not welcome! Indian bar associations and courts have expended tremendous efforts to effectively preclude formal establishment of foreign law firm offices in India through extensive litigation that has endured for decades. As recently as July 2010, the head of the Society of Indian Law Firms has underscored this opposition, stating that ‘The Indian profession will rise up in arms if [foreigners] want to open offices here’.207 The basis for this opposition, he explained, is a concern that liberalization of the Indian legal market is regarded as an effort ‘to emasculate the Indian legal community’.208

202  See Dr Nils Eliasson, ‘A Brief Introduction to Arbitration in Hong Kong’, 23-SPG Int’l L. Practicum 46, 49 (2010). (Chinese law may still prohibit foreign registered lawyers from representing parties in CIETAC arbitration in mainland China without being accompanied by a Chinese attorney, as part of a general prohibition against foreign attorneys interfering with ‘Chinese legal affairs’.) 203  Waiguo Lushi Shiwusuo Zhuhua Daibiao Jigou Guanli Tiaoli (外国律师事务所驻华代表机构管理条例) [Rules on Implementation of the Regulations on the Administration of Foreign Law Firm Representative Offices in China] (promulgated by the State Council, 19 Dec. 2001, effective 1 Jan. 2001), art. 32(4) defined ‘China Legal Business’ to include addressing the application of Chinese law and the issuance of opinions or evaluations of Chinese law as agent in international arbitrations. Article 32(4) was narrowed by a decision of the Ministry of Justice, which prohibited representatives of foreign law firms from commenting in the capacity of agent on the application of Chinese law. In the Reply to the Letter Submitted by CIETEC on Recommendations Related to ‘the Rules on Implementation of the Regulations on the Administration of Foreign Law Firm’s Representative Offices in China by the Ministry of Justice’, the Ministry of Justice provided an explanation on the revisions as follows: ‘Basically, local co-counsel is needed for questions of Chinese law but foreign law firm representatives may nevertheless serve as agent in international arbitrations in China. These regulations have no force outside China because foreign lawyers are not acting as representatives of foreign law firm representative offices in China.’ Lester Ross of Wilmer Hale, email of 5 Aug. 2010. 204  Nils Eliasson, ‘A Brief Introduction to Arbitration in Hong Kong’, 49. 205  For an in-depth analysis of the development of the legal profession in China, see Ethan Michaelson, Unhooking from the State: Chinese Lawyers in Transition (2003). 206  Sida Liu, ‘Globalization as Boundary-Blurring: International and Local Law Firms in China’s Corporate Law Market’, 42 Law & Soc’y Rev. 771, 783–84 (2008) (discussing sanctions imposed by the Chinese Ministry of Justice on Beijing-based foreign lawyers representing clients in an international arbitration case in China in 2005). 207  ‘Law and globalization: Not entirely free, your honour’, Economist, 29 July 2010. 208  See ‘Law and globalization: Not entirely free, your honour’, Economist, 29 July 2010. In an ironic twist, as the Indian legal market remains formally closed to foreign law firms, it is itself infiltrating foreign legal markets by soaking up

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Regulation of attorneys in international arbitration Indian lawyers characterize efforts by foreign firms to open offices as an effort to colonize the Indian legal market, which they claim is evidenced by ‘repeated patronizing, condescending language from foreign law firms regarding the inadequacies of Indian lawyers’.209 As a delayed response to the Bhopal plaintiffs’counsel solicitations, Indian lawyers complain 1.93 that foreign attorneys apparently continue to come in on tourist visas and evade the restrictions of the Advocates Act of 1961.210 These complaints recently manifested themselves in an aggressive lawsuit, alleging that ‘32 law firms . . . are clandestinely operating in India’.211 The Madras High Court finally issued a pragmatic opinion in February 2012, which has particularly salutary effects for international arbitration. Citing ‘national interest’ and reasoning that an across-the-board prohibition on foreign lawyers ‘would be a far-fetched and dangerous proposition’ and ‘a step backward’,212 the Madras High Court concluded that foreign attorneys could fly in and fly out, for example, to represent parties in international arbitration. The Madras High Court is one of several state high courts, but it has concurrent writ jurisdiction with the Indian Supreme Court under Articles 32 and 226 of the Constitution of India. As a result, the Madras High Court decision applies throughout India, subject only to possible appeal to the Indian Supreme Court. Despite the favourable ruling from the Madras High Court, not all is well for international 1.94 arbitration in India. A separate legal action instituted by the same group as the Madras action has successfully petitioned the High Court of Delhi, which is in a different Indian State, to issue notice to the New Delhi branch of the LCIA to remove the word ‘London Court’ from its name.213 The status of this lawsuit remained uncertain as this book was going to print,214 and there are efforts underway to make India more international arbitration-friendly. One sign of progress is that, in August 2013, the LCIA India administered its first arbitration and its future now seems assured as a fixture in the Indian legal market.215

outsourced legal services. Mary C. Daly and Carole Silver, ‘Flattening the World of Legal Services? The Ethical and Liability Minefields of Offshoring Legal and Law-Related Services’, 38 Geo.J. Int’l L. 401, 404–05 (2007). 209   See Krishnan, ‘Globetrotting Law Firms’, 60. 210   See ‘Madras HC issues notice in PIL seeking action against foreign law firms’, Law et al. News, 20/3/2010, . 211  See ‘Madras HC issues notice in PIL seeking action against foreign law firms’. 212  The Madras Court was correct that the Indian legal profession’s protectionism backfired. Instead of preserving the representation of parties in Indian arbitrations for Indian lawyers, it has resulted in an off-shoring of arbitration—parties that might otherwise arbitrate in India instead seat their arbitrations in Singapore, or elsewhere. 213  See Soibam Rocky Singh, ‘Delhi HC Issues Notice on Working of London Court of International Arbitration in Delhi’, Law et al. News, 31 May 2011, . For an interesting analysis of the history of legal services and current regulatory climate in India, see Krishnan, ‘Globetrotting Law Firms’. 214  A month after the alleged notice, the LCIA had yet to receive a summons and no papers had been filed at the LCIA India registrar by the court or plaintiffs. See Ben Lewis, ‘Indian Arbitration: The Road Less Traveled’, Law.com (20 June 2011), ; Sebastian Perry, ‘LCIA faces lawsuit in India’, Global Arb. Rev. (3 June 2011), . Moreover, many Indian arbitration specialists question the seriousness of the lawsuit. See Edward Machin, ‘LCIA India told to change name by Delhi lawyers’, . 215  See Prachi Shrivastava, ‘LCIA yet to bag 10th case as high-powered Hiranandani arbitration resolved with Cherie Blair’; AP Shah, ‘Karanjawala’, Legally India (8 Aug. 2013), .

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From an Invisible College to an Ethical No-Man’s Land 1.95 The obstacles for international arbitration that exist in India, as well as those in Thailand,

Chile, and China, are generated by fears that globalization of the legal profession will harm local law firms. These protectionist measures, therefore, bring the discussion back to the demographics of globalization of law firms more generally. 3.  Demographics in global and international arbitration practice

1.96 It is not surprising that international arbitration practice is dominated by Anglo-American

mega-firms and established Continental practitioners since those were the first movers in globalization of the legal profession more generally. Because of their size, Anglo-American firms were uniquely well-positioned to expand internationally.

1.97 The arrival of US- and UK-based law firms has had significant effects on local markets.

For example, France opened its legal market to foreign firms in the 1970s, and Germany in 1998. By 2005, there were only four French-owned law firms among the top 25 firms in France, and ‘eight of the top 10 law firms in Germany were operated by US and UK law firms’.216

1.98 In other local legal markets, particularly emerging economies, foreign firms often domi-

nate international work.217 While these developments have fuelled concerns like those expressed by Indian lawyers, it would be too simple to dismiss them as a neocolonialist effort to entrench American and British law firm hegemony.218 The scene is much more complex. As a starting point, particularly in international arbitration, as analysed in Section 2 (‘Jurisdictions Historically Hostile to Foreign Lawyers in International Arbitration’), excluding foreign lawyers from participating in locally seated international arbitrations does not protect local law firms. Instead, foreign parties and counsel avoid that jurisdiction as a seat for arbitration and the ultimate result is a reduction in arbitration business for local legal service providers. Even if local firms are not the primary counsel in international arbitrations, locally seated arbitration can be good for the local economy, including for local lawyers, who may consult on issues of local law or become involved if there is a need to petition local courts.

1.99 The arrival of foreign mega-firms may also be good news for local attorneys for other reasons.

Recent empirical research suggests that the arrival of mega-firms has not necessarily, or at least not only, displaced local attorneys. With the exception of a few unique jurisdictions like

216  Kyungho Choi, ‘Korean Foreign Legal Consultants Act: Legal Profession of American Lawyers in South Korea’, 11 Asian-Pac. L. & Pol’y J. 100, 104 (2010) (internal citations omitted); see also John E. Morris, ‘Germany Invaded!’ Am. Law., Sept. 2000, 32. 217  Until relatively recently, the explanation was that local law firms could not provide the services desired by foreign investors in certain sectors. See Geoffrey C. Hazard Jr. and Angelo Dondi, Legal Ethics: A Comparative Study, 56 (noting that China ‘wanted to expand its legal profession at a rapid rate, but [lacking] the university apparatus and cadres of graduates to do so[,]‌. . . has admitted people with basic literacy and substantial experience in practical office affairs to the profession of lawyer’); Eliasson, ‘A Brief Introduction to Arbitration in Hong Kong’, 49; Andrew Godwin, ‘The Professional “Tug of War”: The Regulation of Foreign Lawyers in China, Business Scope Issues and Some Suggestions for Reform’, 33 Melb. U. L. Rev. 132, 143 (2009) (‘[I]n the early 1990s . . . there were no local law firms with a national presence within China, let alone firms with an overseas presence, that could compete successfully with international law firms in the lucrative foreign direct investment (FDI) market.’). 218  See Yves Dezalay and Bryant G. Garth (eds.), Global Prescriptions: The Production, Exportation and Importation of a New Legal Orthodoxy (2002); Krishnan, ‘Globetrotting Law Firms’, 60 (2010).

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Regulation of attorneys in international arbitration Brussels and Hong Kong, the majority (around two-thirds)219 of attorneys who staff overseas offices of US-based law firms apparently have their primary legal education and licensing outside the United States.220 Somewhat more surprisingly, only 9% of these local attorneys staffing foreign offices are admitted both in and outside the United States, and only a third of these attorneys have any US legal education, either a J.D. or LL.M.221 In other words, the primary growth of multinational law firms in foreign markets has been through hiring local attorneys, usually without requiring that they have substantive expertise or other professional ties to the United States. This staffing appears to be equally if not more true of international arbitration practice groups. These statistics suggest that globalization of law firms may not so much be a neo-colonialist 1.100 invasion into local legal markets,222 as feared by the Chinese and Indian opposition to foreign firms. Instead, it may indicate a process of ‘glocalization’.223 Under this view, mega-firms adapt to foreign local marketplaces through attorneys who have local legal culture and training, with relatively few foreign attorneys functioning as liaisons with the ‘home’ firm.224 In Brazil, even if some concerns remain about foreign firms ‘com[ing] in and steal[ing] all the sweets’, they are also described as ‘fueling a red-hot jobs market for locals’, at least for ‘ambitious young attorneys’ who can earn ‘higher pay and faster promotion’ than at local firms but ‘at the expense of the old guard’.225 These demographics are both the background against which global arbitration practice 1.101 developed, and a catalyst for developments within international arbitration. For example, the so-called ‘Americanization’ of international arbitral procedure226 is undoubtedly a reflection of the dominance of US (and to some extent UK) firms in the largest international arbitrations. Similarly, the oft-noted under-representation of minority and female arbitrators, particularly in investment arbitration and in the largest commercial arbitration disputes, may be viewed as at least partially attributable to the severe shortage of diverse and female partners with significant seniority in global law firms.227

219   Robert L. Nelson, ‘Are We There Yet? Empirical Research and the Predicted Demise of Large Law Firms: An Introductory Essay’, 22 Geo. J. Legal Ethics 1249, 1254–55 (2009). 220  Carole Silver et al., ‘Between Diffusion and Distinctiveness in Globalization: US Law Firms Go Glocal’, 22 Geo. J. Legal Ethics 1431, 1448–51 (2009). 221 Silver et al., ‘Between Diffusion and Distinctiveness in Globalization’, 1450. 222  Several scholars argued that: Steven Mark, ‘Harmonization or Homogenization? The Globalization of Law and Legal Ethics—An Australian Viewpoint’, 34 Vand. J. Transnat’l L. 1173, 1179–80 (2001); Susan Marks, ‘Empire’s Law’, 10 Ind. J. Global Legal Stud. 449, 451–52 (2003). 223  See Silver et al., ‘Between Diffusion and Distinctiveness in Globalization’, 1433. This conclusion does not take into account the allocation of administrative power or profits as among so-called ‘local’ partners and partners in the home country. While employment in branches of multi-national firms may pay at the high end or above the compensation level of top local firms, foreign attorneys employed in foreign offices are often paid less than those in UK or US offices where the firm originates. One reason for this pay differential can be the lower cost of living in most jurisdictions outside London, New York, and other hubs of multinational firms. 224 Silver et al., ‘Between Diffusion and Distinctiveness in Globalization’, 1433. 225  ‘Keep Out: Brazilian lawyers don’t want pesky foreigners poaching their clients’, The Economist, (23 June 2011). 226  See paras 9.52–9.53. 227  Lucy Greenwood and C. Marc Baker, ‘Getting a Better Balance on International Arbitration Tribunals’, 28(4) Arb. Int’l 653 (2012) (‘A major cause of the under-representation of women on international arbitration tribunals is the lack of women making it thorough to the upper eschelons of the legal profession.’). This

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From an Invisible College to an Ethical No-Man’s Land 1.102 On the other hand, the ‘regionalization’ and diversification of international arbitration,

noted previously,228 signals that international arbitration cannot expand into new markets without bringing into its fold lawyers and arbitration professionals from those markets. For example, the management of the new LCIA India is made up of Indians, and the arbitrators in the first arbitration under the auspices of the LCIA involved the Chief Justice of the Indian Supreme Court, in addition to two prominent women arbitrators from the UK and US.229 The arrival of new players brings diverse legal cultures and professional skills that contrast with those of major, established, multi-national law firms. While contributing to diversity, these new players have also brought to the fore new ethical issues and highlighted the absence of meaningful regulation in international arbitration.

1.103 Looking to the future, the most significant culture gap in international arbitration may turn

out to be between practitioners at multi-national firms, of whatever nationality, and practitioners at smaller regional or national firms. Large, multi-national law firms provide internal training, as well as internal management protocols and procedures, that establish standards for practice that are often tied to those of the firm’s home office. They are more likely to have specialized practice groups that focus exclusively on international arbitration.

1.104 As the number of regional arbitration outposts and the number of smaller and medium-sized

arbitral disputes grow, the size and hemogeny of international arbitral practice will also continue to expand. International arbitration has, in its past, managed to absorb new players and adapt to market transitions. It is facing similar challenges again today with respect to professional regulation of its various participants.

F. Conclusion 1.105 Professional regulation of attorneys was traditionally based on a model of a local licensure

and local discipline of locally produced rules for attorneys engaged in local law practice. The globalization of law practice has forced national bar authorities to reconsider this old model in light of an influx of foreign lawyers operating within their jurisdictions and, more recently, the activities of locally licensed attorneys abroad, including before international tribunals. As with various other industries, however, local and national regulatory bodies and the rules they promulgate are tailored to local and national legal contexts. They are ill-equipped to regulate attorneys who operate on a wholly transnational plane, such as multi-national, multi-jurisdictional international arbitration practitioners. In their professional activities, an Indian attorney practising in the international arbitration group of a Singaporean law firm, a Brazilian attorney practising in an international arbitration group in the Geneva branch of an English law firm, and a Lebanese attorney practising in the Paris office of a US law firm’s international arbitration practice all have much more in common with each other than they do with lawyers licensed in their home jurisdictions who practise primarily domestic law. The nature of their professional activities in international arbitration transcend national observation suggests that, as women get further in the law firm pipeline, the number of arbitral appointment for women may increase. Nevertheless, other more subtle obstacles undoubtedly also exist, such as unconscious gender bias. See Greenwood and Baker, ‘Getting a Better Balance on International Arbitration Tribunals’, 662. 228  See paras 1.28–1.34. 229  See Prachi Shrivastava, ‘LCIA yet to bag 10th case as high-powered Hiranandani arbitration resolved with Cherie Blair’; AP Shah, ‘Karanjawala’.

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Conclusion borders. They have little relationship to the ethical rules that were designed to regulate legal activities within those borders. They are, it may be said, a new ‘International Arbitration Bar’. It is time they be regulated as such. Regulating attorneys within international arbitral procedures and institutions may seem like 1.106 a daunting challenge. Compared to improbable creation and tremendous evolution of the international arbitral regime, however, it may seem like a more modest goal. Whatever the measure, regulation of attorneys is an essential predicate to regulation of third-party funders and expert witnesses. When the international criminal law community confronted the obvious need for inter- 1.107 national ethical regulation, the International Criminal Tribunal for the Former Yugoslavia (and other international courts) delegated the issue to special administrative bodies. These entities drafted and implemented codes of conduct, established procedures, and designated personnel to administer it.230 The ‘International Criminal Bar’ took these steps because they realized international criminal justice could not function effectively and legitimately without professional regulation of those managing and participating in its proceedings. The development of a fully functioning ethical regime for international arbitration, 1.108 however, presents distinct challenges from those faced by the international criminal law regime. In contrast to international criminal tribunals, international arbitration is a decentralized and highly diversified network of ad hoc tribunals. Its most visible and long-standing entities, arbitral institutions, have no formal or legal relationship to each other. States are intentionally cordoned off from arbitral proceedings and inter-connected only through treaty obligations to enforce agreements and awards. For the reasons described earlier, national bar authorities and legislatures are ill-equipped to step in, but unlike international criminal law, there are no public international bodies to which the power to promulgate binding ethical rules can readily be delegated. International arbitration, in other words, presents unique challenges for ethical regulation. The project of the remaining chapters of this book is not to suggest definitive answers about 1.109 how to meet all of these challenges. It is instead to document the existing challenges in the next four chapters, and propose conceptual and theoretical frameworks for answering those challenges in an overall regime of self-regulation in the remaining chapters. Despite disclaiming aspiration to a definitive master plan, and conceding that it leaves many questions unanswered, this book makes a number of specific proposals. Many elements of the proposals build on features that already exist in international arbitration practice. Others will not be immediately feasible, but are instead long-term goals that will hopefully materialize for arbitration in the next 20 years. And still other proposals may be contested, or ultimately even prove unworkable. Debating, contesting, negotiating, and experimenting with various approaches is a healthy, and even essential, part of the process of developing and implementing ethical regulation.

230  See Rogers, ‘Lawyers Without Borders’, 1078–79; Judith A. McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals: A Case Study of the ICTY’, 30 B.C. Int’l & Comp. L. Rev. 139 (2007).

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From an Invisible College to an Ethical No-Man’s Land 1.110 Ultimately, the challenge of ethical self-regulation is a challenge for the international arbi-

tration community to think beyond its present situation, to future generations and future developments in an ever-more globalized legal world. It is a challenge for international arbitration to bring to bear all the pragmatism, creativity, and sense of the noble duty to transnational justice that it has demonstrated in the very best moments of its history. In sum, it is a challenge for international arbitration to reconstitute Schachter’s Invisible College to redress the modern problems of international arbitration’s ethical no-man’s land.

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2 ARBITRATORS, BARBERS, AND TAXIDERMISTS [B]‌arbers and taxidermists are subject to far greater regulation than arbitrators. Richard Reuben* In the US, an arbitrator can be disqualified for using ‘the same hairdresser as the counsel of one of the parties.’ Otto L.O. de Witt Wijnen**

No one seems to agree about whether international arbitrators are over-regulated or 2.01 under-regulated. Some commentators contend that international arbitrators are virtually unregulated, or at least less regulated than their haircutting counterparts.1 Others take the view that international arbitrators are so over-regulated, they can be disqualified simply for having ‘the same hairdresser as the counsel of one of the parties’. These two opposing views seem to converge only on their facetious use of coiffeurs as a baseline for comparison. This chapter analyses how both assessments are at least partially true. Those who are concerned about under-regulation of international arbitrators focus on the 2.02 apparent absence of traditional forms of professional regulation.2 Arbitrators are not required to have any special training, certification, or licensure.3 As a result, they are not subject to the *   Richard C. Reuben, ‘Public Justice: Toward a State Action Theory of Alternative Dispute Resolution’, 85 Cal. L. Rev. 577, 637 (1997). **   Otto L.O. de Witt Wijnen, ‘Challenges to the appointment of arbitrators on grounds of bias/conflict of interest—current problems’, ¶ 2.4 (2003) (paper presented at the LCW AMINZ seminar, Auckland, New Zealand, 20 Feb. 2003) (on file with author). 1   See Dora Marta Gruner, ‘Accounting for the Public Interest in International Arbitration: The Need for Procedural and Structural Reform’, 41 Colum. J. Transnat’l L. 923, 962 (2003) (proposing, among other things, an international regulatory body that would monitor arbitrators and assure their expertise and integrity). See also David Sherwyn et al., ‘In Defense of Mandatory Arbitration of Employment Disputes: Saving the Baby, Tossing Out the Bath Water, and Constructing a New Sink in the Process’, 2 U. Pa. J. Lab. & Emp. L. 73, 126–8 (1999) (proposing arbitrator licensing and oversight mechanisms for employment discrimination claims); Theodore A. Levine and Peter R. Cella, ‘Arbitrator Training and Selection’, 63 Fordham L. Rev. 1679 (1995) (discussion of same regarding securities arbitration); Nicole Buonocore, ‘Resurrecting a Dead Horse– Arbitrator Certification as a Means to Achieve Diversity’, 76 U. Det. Mercy L. Rev. 483, 483, 496 (1999) (proposing certification for labour arbitrators as a way to promote diversity); David A. Hoffman, ‘Certifying ADR Providers’, B. B.J., Mar. 1996, 9. 2  The terms ‘regulate’ and ‘regulation’ and ‘self-regulation’ are examined in greater detail in Chapter 6. 3  This absence of regulatory oversight is striking when compared to coiffeurs. In California, for example, it is a criminal misdemeanour for unlicensed persons to perform haircutting services for money, and the California Board of Barbering and Cosmology disciplines persons who violate the Act. See Cal. Bus. & Prof. Code § 7317 (West 1990).

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Arbitrators, Barbers, and Taxidermists direct oversight, discipline, or sanctions that traditionally regulate other organized professions. Also, unlike other legal professionals, international arbitrators generally enjoy almost complete immunity from professional malpractice liability, even for allegedly egregious errors.4 2.03 In addition to an absence of formal sanctions, international arbitrators are largely insulated

from market-based regulation.5 International arbitration is an ostensibly private process. As a result, international arbitrator conduct is largely insulated from public scrutiny and broadbased reputational sanctions. Meanwhile, significant barriers to entry into the market for arbitrator services ensure that international arbitrators cannot be easily replaced or the pool of arbitrators easily expanded.6 The absence of an effective market has led some to refer to arbitrators as a ‘cartel’.7 The favour-trading that occurs within this elite echelon of the community of leading arbitrators and arbitration specialists (described in greater detail later) has led others to characterize arbitrators as a ‘mafia’.8

2.04 Even though conventional forms of professional regulation are absent, it would be a mistake

to conclude that arbitrators are not regulated at all. A flood of new sources aim at regulating the conduct of international arbitrators. Various international bodies have promulgated new ethical rules, guidelines, procedural rules, and other criteria to manage and evaluate the conduct of international arbitrators. These sources supplement the arbitral rules and national laws that already govern the selection, appointment, and challenge of arbitrators.

2.05 National judicial decisions reviewing challenges to arbitrators and their awards add to these

various sources of ethical standards, though not always in a consistent or coherent manner. In some instances, national bar authorities and national legislatures have also promulgated

4   See, e.g., Susan D. Franck, ‘The Liability of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity’, 20 N.Y.L. Sch. J. Int’l & Comp. L. 1, 2–3 (2000) (arguing for broad arbitrator immunity qualified by statutory mechanisms punishing intentional, bad-faith conduct, or unjustifiably abandoning the arbitral mandate and failing to render an award). Some systems, such as France, allow for arbitrator liability based on analysis of arbitrator services as a contractual obligation that, if breached, can be the source of a claim for compensation. See, e.g., Judgment, Tribunal de grande instance [TGI] [ordinary court of original jurisdiction] Paris, 13 June 1990, 1996 Rev. rb. 475, aff’d, Judgment, Bompard v Consorts C. et al., Cour d’appel [CA] [regional court of appeal] Paris, 22 May 1991, 1996 Rev. arb. 475 (Fr.); Judgment, Cour de cassation [Cass.] [supreme court for judicial matters] 1e civ., 17 Nov. 2010, 2011 Rev. arb. 943 (Fr.). In addition, arbitrators are not generally immune under either arbitral rules or national arbitration laws for intentional wrongdoing. See, e.g., International Centre for Dispute Resolution [ICDR] Arbitration Rules, art. 35 (2010) (arbitrators are immune ‘except that they may be liable for the consequences of conscious and deliberate wrongdoing’). 5  A.S. Rau, ‘The Arbitrability Question Itself ’, 10 Am. Rev. Int’l Arb. 287, 365 n. 218 (1999) (noting aspects of arbitration that undermine competitive forces in the market for arbitrators). 6  Dezalay and Garth provide an explanation for what appears to be a contradiction between expansion of the field, on the one hand, and barriers to entry and maintenance of control by a tight in-group on the other. They explain that the influx of newcomers, while participating intermittently in individual arbitrations, remain on the periphery of the field of international arbitration practice. Yves Dezalay and Bryant G. Garth, Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order (1996) 37. Eric W. Lawson, Jr, ‘Arbitrator Acceptability: Factors Affecting Selection’, 36 Arb. J. 22, 23 (1981) (arguing that previous service as an arbitrator ‘is the sine qua non, for there is no other recognized route of entry into the profession of arbitration’). 7  Iran-United States, Case No. A/18, 5 Iran-U.S. Cl. Trib. Rep. 251, 336 (1984) (describing ‘ “professional” arbitrators’ as ‘forming an exclusive club in the international arena, are automatically brought into almost any major dispute by the operation of predetermined methods’). 8  Dezalay and Garth, Dealing in Virtue, 18–21 (quoting one international arbitration specialist as saying, ‘Now why is it a mafia? It’s a mafia because people appoint one another. You always appoint your friends—people you know’; quoting an international arbitrator as saying, ‘They nominate one another. And sometimes you’re counsel and sometimes you’re arbitrator.’).

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Arbitrators, Barbers, and Taxidermists new rules and laws.9 Some commentators object that the proliferation of new rules has not led to clearer standards, but instead has created a trap for vigilant arbitrators and increased opportunities for gamesmanship by unscrupulous parties.10 Proponents of the view that arbitrators are over-regulated point not only to the increase in 2.06 sources, but also to an apparent increase in the number of challenges to arbitrators in recent years.11 To the extent that new rules and standards are developed under national regimes, they may be inapposite or even seem absurd to practitioners from other national legal systems. That is why a European might not discern that it is only playful hyperbole to suggest that an arbitrator can be disqualified in the United States for using the same hairdresser as a party.12 Debates about arbitrator regulation almost reflexively focus on the substance of the rules— 2.07 are disclosure standards too exacting or not exacting enough?13 What categories of disclosure information should necessarily result in disqualification? What other ethical obligations do arbitrators have? Should so-called issue conflicts be a basis for disqualifying arbitrators? Are party-appointed arbitrators subject to the same impartiality obligations as arbitral

9   See, e.g., ABA/AAA, Code of Ethics for Arbitrators in Commercial Disputes (2004) (US); ‘Camera Arbitrale Nazionale e Internationale Milano, Code of Ethics of Arbitrators (It.)’, . The most notable effort was by the California legislature mandating extremely broad disclosure obligations on arbitrators. See Cal. Code Civ. P. §§ 1280 et seq. 10   Parties’ launching of multiple unfounded challenges to arbitrators is often characterized as an example of improper ‘guerrilla tactics’ by parties. See Simon Greenberg, ‘Tackling Guerrilla Challenges Against Arbitrators: Institutional Perspective’, Transnat’l Disp. Mgmt. (2010), . Some courts have attempted to dissuade frivolous challenges by imposing sanctions on counsel. See, e.g., World Bus. Paradise, Inc. v Suntrust Bank, 403 F. App’d 468, 471 (11th Cir. 2010) (imposing sanctions for frivolous appeal of arbitrator challenge without party motion for sanctions); Fornell v Morgan Keegan & Co., Inc., 6:12-CV-38-ORL-28TBS, 2012 WL 3155727 (M.D. Fla. Aug. 3, 2012) (granting sanctions upon party motion); DigiTelCom, Ltd v Tele2 Sverige AB, 12 CIV. 3082 RJS, 2012 WL 3065345 (S.D.N.Y. 25 July 2012) (same). See also Christopher McKinney, Note, ‘Too Many Motions for Vacatur of Commercial Arbitration Awards? The Eleventh Circuit Sanctions Unwary Litigants’; B.L. Harbert International, LLC v. Hercules Steel Company, J. Disp. Resol. 283 (2007); J.P. Duffy, ‘Opposing Confirmation of International Arbitration Awards: Is It Worth the Sanctions?’ 17 Am. Rev. Int’l Arb. 143 (2006). 11  Some authors have identified an increase in the absolute number of arbitrator challenges as a sign that challenges are on the rise. See Michael Polkinghorne and Emilie Gonin, ‘Barristers from the Same Chambers Appearing as Counsel and Arbitrator: Independence Revisited?’ 5 No. 2 Disp. Resol. Int’l 163, 171 (2011) (citing numerous statistics: LCIA registered 14 challenges from 2001–05, 4 challenges in 2008, and 10 challenges in 2009 and 2010, respectively; SCC registered 5 challenges in 1999, 4 in 2000, 2 in 2001 and 2002, 10 in 2004, 11 in 2005, 6 in 2006, and 5 in 2007; ICC registered 33 challenges in 2000 and 2001, respectively, 17 in 2002, 20 in 2003, 37 in 2004, 40 in 2005, 38 in 2006, 22 in 2007, 23 in 2008, and 34 in 2009); International Chamber of Commerce International Court of Arbitration, Securing a Regime for Effective International Arbitrations, Minutes from Delegation at the International Chamber of Commerce, at 4, 26 Jan. 2005. See also ICC: Statistics, . The rise in absolute numbers is not necessarily indicative of a rise in the overall rate of challenges. Analysis of the rate of challenges to arbitrators is taken up later in Chapter 8. 12  See Otto L.O. de Witt Wijnen, ‘Challenges to the appointment of arbitrators on grounds of bias/conflict of interest-current problems’, ¶ 2.4 (2003) (paper presented at the LCW AMINZ seminar, Auckland, New Zealand, 20 Feb. 2003) (on file with author). Dr de Witt Wijnen’s characterizations of the apparent eccentricities of US disqualification standards are apocryphal, but the underlying confusion expressed about level of detail apparently required by some US disclosure obligations are accurate. 13  Compare James H. Carter, ‘Rights & Obligations of the Arbitrator’, 52-JAN Disp. Resol. J. 56 (1997) (arguing that arbitrator obligations should be construed in light of ‘arbitrator’s rights’ and thus not be too constrictive), and William O’Malley Forbes, ‘Rules of Ethics for Arbitrators and Their Application’, 9(3) J. Int’l Arb. 5 (1992) (calling for heightened ethical standards).

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Arbitrators, Barbers, and Taxidermists chairpersons? This almost exclusive focus on the substance of arbitrator obligations obscures larger questions that are critical for regulating arbitrators and for the future of professional regulation of international arbitration: Who should have primary responsibility for determining the appropriate standards? How should those standards be enforced? And which institutions and processes should have primary regulatory authority? 2.08 The thesis of this book is that the ethical obligations of arbitrators, and other participants

in international arbitration, should be determined and enforced through a regime of self-regulation. The nature of that self-regulatory regime is analysed in Chapter 6. This chapter instead provides a survey of the practical context in which issues of arbitrator ethics and arbitrator regulation arise.

2.09 Section A begins with a profile of international arbitrators and an overview of how the

selection process operates in the modern market for international arbitrator services. This background provides important predicates for analysing the state of arbitrator regulation and illuminates why informal means, such as vague, open-ended disclosure standards and informal reputational sanctions, are no longer a sufficient substitute for formal regulation. An overview of the selection process also provides essential background for topics that are taken up later in Chapters 8 and 9, such as proposals to eliminate unilateral party-appointment of arbitrators, the effect of so-called issue conflicts, and the role of arbitrators as something more than mere service providers.

2.10 After this background in Section A, Section B surveys the various sources of arbitrators’ obli-

gations and provides an overview of how and when they apply to arbitrators. Finally, Section C of this chapter surveys the substantive obligations that the various sources described in Section B impose on arbitrators.

A.  Arbitrator selection and the marketplace for arbitrator services 2.11 Arbitrators are selected and appointed from a market for international arbitration services.

As described in Chapter 1, international arbitration has become a high-stakes and a highly competitive marketplace, though not an entirely efficient marketplace. This section provides an essential overview of that market and the processes for selecting and appointing arbitrators from that market. The ultimate conclusion of this section is that the inefficiencies and opacity in the modern marketplace for arbitrators are inconsistent with increasing transparency and related demands for accountability in international arbitration more generally. 1.  The pool of international arbitrators

2.12 International arbitrators are exceptionally talented individuals. Most speak multiple

languages.14 They boast rich and multi-national educations from the world’s most prestigious 14  A good illustration is available on iaiparis.com, a searchable website directory of international arbitrators, where it is possible to identify candidates based on particular combinations of language competences. But even if you enter what would seem to be improbable pairs, such as Uzbek and Spanish, or Russian and Arabic, you can usually find a candidate. These random searches, for example, yielded respectively Noah Rubins, an American who, in addition to Uzbek and Spanish, is also skilled in English, French, and Russian, or Samir A. Saleh, a Lebanese and British citizen, who in addition to Russian and Arabic, is also fluent in English and French.

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Arbitrator selection and arbitrator services universities15 and often have experience in the highest echelons of diverse legal systems. Their multi-faceted, multi-cultural legal experience is often supplemented by technical or industry-specific expertise. These cumulative credentials are often leveraged in scholarly research16 and enhanced by university professorships. The most experienced of these arbitrators are appointed and re-appointed to the most important international disputes.17 Leading arbitrators are called on to resolve everything from delicate matters of diplomacy, to controversies involving sums larger than the annual operating budget of some smaller nations, to issues at the edge of the legal frontiers of international and transnational law.18 Historically, as described in Chapter 1, arbitral justice was more rough-hewn, Euro-centric, 2.13 and equity-driven. International arbitrators in that era were a small, intimate group of European ‘grand notables’ or ‘Grand Old Men’.19 Individuals were trusted as arbitrators because they reputedly shared a sense of duty about what it means to perform their function.20 This perspective is captured in one arbitrator’s comment that they viewed their role as ‘a duty, not a career’.21 It also may account for why the New York Convention does not even mention the possibility that arbitrators may engage in misconduct—arbitrators’ internal ethos was presumed to be a sufficient means of regulating their conduct. Demographically, the body of international arbitrators is, still today, overwhelmingly domi- 2.14 nated by men22 from North America and Europe. The figures are startling,23 although the

15   Dezalay and Garth, Dealing in Virtue, 18–21 (discussing and citing examples of the importance of a prestigious education in building a career as an arbitrator). 16   See Dezalay and Garth, Dealing in Virtue, 19–21 (explaining the development of the career of famous arbitrator Pierre Lalive). Unlike most other areas of legal practice, all the leading treatises are written by practicing arbitrators and arbitration specialists. 17   The industry keeps careful track of those arbitrators who are most frequently appointed. See, e.g., Michael Goldhaber, ‘Arbitration Scorecard 2013’, Am. Law., 24 June 2013, (listing international arbitrators with the heaviest caseloads, number of cases overseen, value of the cases, and other details). 18   For example, in 2010, there were over 113 arbitration cases worldwide in which the amount at stake was over US$1 billion dollars, and another nearly 150 disputes valued at over US$100 million. In a random but nevertheless striking coincidence, from January 2009 to June 2011, there were 11 arbitration awards and 11 US court verdicts over US$350 million. See Michael D. Goldhaber, ‘High Stakes: Arbitration Scorecard 2011’, Am. Law., 1 July 2011, . 19  See Chapter 1. 20  See Jan Paulsson, ‘Ethics, Elitism, Eligibility’, 14 J. Int’l Arb. 13, 17 (1997). 21  Dezalay and Garth, Dealing in Virtue, 34. 22  See Lucy Greenwood and Mark C. Baker, ‘Getting a Better Balance on International Arbitration Tribunals’, 28 Arb. Int’l 653 (2012); Annalise Nelson, ‘The Representation of Women in Arbitration—One Problem, Two Issues’, Kluwer Arb. Blog (12 Nov. 2012), ; Lisa Bench Nieuwveld, ‘Women in Arbitration: Lots of Talk, Any Changes?’ Kluwer Arb. Blog, 22 Nov. 2011, ; Gus van Harten, ‘The (lack of) Women Arbitrators in Investment Treaty Arbitration’, Columbia FDI Perspectives, No. 59, 6 Feb. 2012; Michael D. Goldhaber, ‘Too Few Women Among Top International Arbitrators’, Law.com, 30 June 2009, . 23  Status as an arbitrator is closely linked to some combination of partnership in a multinational law firm, experience as an international judge, or a senior professorship in an internationally renowned institution, all institutions generally dominated by men and difficult for ‘outsiders’ to penetrate. cf. Joan C. Williams, ‘Litigating the Glass Ceiling and the Maternal Wall: Using Stereotyping and Cognitive Bias Evidence to Prove Gender Discrimination’, 7 Emp. Rts. & Emp. Pol’y J. 287, 294 (2003) (describing ‘the tendency of in-groups

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Arbitrators, Barbers, and Taxidermists composition of the field is slowly changing. As described in Chapter 1, the expansion and diversification of international arbitration cases have brought new parties and some new individuals to the ranks of international arbitrators. These changes bring new challenges for a group that still considers itself a closed ‘circle’ that ‘deliberate[s]‌within an intellectual zone of shared confidence’.24 2.15 In addition to new arrivals bringing different ethical assumptions and potentially disruptive

new practices, they also bring new scepticism about prevailing practices. Parties and participants from outside the inner circle may have different views about the acceptability of prevailing practices among insiders and they may more generally question the absence of a full range of diverse backgrounds among arbitrators as compared to the parties and participants over which they preside.25 In addition, new parties and practitioners may not have adequate information to make effective decisions during the arbitrator selection process, which in itself may raise questions about fairness.

2.16 One example of disruptive practices introduced by newcomers was the introduction,

already mentioned in Chapter 1, of the now largely defunct domestic US arbitration practices with respect to party-appointed arbitrators. Until recently, parties and their counsel in domestic US arbitrations communicated throughout arbitral proceedings with their party-appointed arbitrators.26 Parties, counsel, and arbitrators from most other systems find such ex parte communication wholly unacceptable.27 After considerable debate and

to apply objective rules rigorously to outsiders but flexibly to insiders’). While implicit cognitive bias may be a factor for why females and arbitrators of colour are not better represented in the pool of arbitrators, and worthy of exploration, it is beyond the scope of this work. 24  Jan Paulsson, ‘Are Unilateral Appointments Defensible?’ Kluwer Arb. Blog, 2 Apr. 2009, . 25  See, e.g., Ahmed Sadek El-Kosheri, ‘Is There a Growing International Arbitration Culture in the ArabIslamic Juridicial Culture?’ in Albert Jan van den Berg (ed.) International Dispute Resolution: Towards an International Arbitration Culture (1998) 47, 47–48 (noting that, despite the long history and current popularity of arbitration in Arab nations, the Arab legal community remains hostile toward transnational arbitration because of biased treatment by Western arbitrators); John Beechey, ‘International Commercial Arbitration: A Process Under Review and Change’, Disp. Resol. J. (2000) 32, 33 (explaining that there ‘remains a huge task’ to convince developing nations that they can expect a fair hearing before international arbitration tribunals); Dezalay and Garth, Dealing in Virtue, 43–45. 26   See, e.g., Sunkist Soft Drinks, Inc. v Sunkist Growers, Inc., 10 F.3d 753, 759 (11th Cir. 1993) (finding no prejudicial misconduct despite finding that party-appointed arbitrator met with representatives and witnesses of appointing party before arbitration to plan strategy). This approach was generally rejected when the AAA/ ABA Code of ethics was revised. See AAA/ABA Code of Ethics, Note on Neutrality (‘This Code establishes a presumption of neutrality for all arbitrators, including party-appointed arbitrators, which applies unless the parties’ agreement, the arbitration rules agreed to by the parties or applicable laws provide otherwise.’). See also Byrne, ‘A New Code of Ethics for Commercial Arbitrators: The Neutrality of Party-Appointed Arbitrators on a Tripartite Panel’, 30 Ford. Urb. L.J. 1815 (2003); Paul Friedland and John Townsend, ‘Commentary on Changes to the Commercial Arbitration Rules of the American Arbitration Association the AAA and the ABA House of Delegates Have Approved the Revised Code’, 58 Disp. Res. J. 8 (2004); Bruce Meyerson and John M. Townsend, ‘Revised Code of Ethics for Commercial Arbitrators Explained’, 59 Disp. Res. J. 10 (2004); Ben H. Sheppard, ‘A New Era of Arbitrator Ethics for the United States: The 2004 Revision to the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes’, 21 Arb. Int’l 91 (2005). 27  Amb. Malcolm Wilkey, ‘The Practicalities of Cross-Cultural Arbitration’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 86 (describing differing approaches to ex parte communication as a problem in international arbitration that must be overcome); Detlev Vagts, ‘International Legal Ethics and Professional Responsibility’, 92 Am. Soc’y Int’l L. Proc. 378, 379 (1998) (discussing a hypothetical case involving contrasting approaches to ex parte communication with arbitrators as basis for panel discussion). See also Hans Smit, ‘Managing an International Arbitration: An Arbitrator’s View’, 5 Am. Rev. Int’l Arb. 129, 131 (1994) (taking the view that communications

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Arbitrator selection and arbitrator services consternation,28 various sources now specify that all arbitrators are subject to the same duties of independence and impartiality. Chapter 8 examines how this rhetorical reaction to the historical American practice may have actually caused confusion of its own. Another example of newcomers challenging the status quo is illustrated by in Hrvatska 2.17 Elektroprivreda, d.d. v The Republic of Slovenia.29 In that case, the respondent retained an English barrister who was a member of the barristers’ chambers in which the Tribunal’s President was a door tenant.30 The respondent contended that there was no conflict of interest because it was accepted in English practice to have a barrister from the same chambers on opposing sides of the same case or acting as an arbitrator and party representative counsel in the same case. In response, the Croatian claimant argued, ‘the community of participants in ICSID arbitrations is much broader than the English bar, and what may not, apparently, be cause for concern in London may well be viewed very differently by a reasonable third person from Africa, Argentina, or Zagreb, Croatia’.31 The tribunal decided that distrust ‘from the claimant’s cultural perspective’ about practices considered perfectly acceptable among the English Bar instead caused what it deemed were ‘justified’ or even ‘unavoidable’ doubts about the impartiality of arbitrators in that case.32 While this particular case involved issues of arbitrator conflicts in barrister chambers, perceptions by newcomers have also raised other concerns regarding the arbitrator’s role, particularly in investment arbitration, a subject that will be taken up expressly in Chapters 8 and 9.33 2.  The field in which international arbitrators operate Stepping back from arbitrators themselves, in the last 20 years, international arbitration has 2.18 matured, becoming more sophisticated and diversified in a range of categories. Modern international arbitration involves a constellation of parties, counsel, and disputes from legal cultures that span the entire globe. The transnational legal environment has also become more

between party and party-appointed arbitrator concerning the appointment of the presiding arbitrator are generally accepted where the party-appointed arbitrator takes part in the selection process, even if the rules are silent); Hans Smit, ‘The Future of International Commercial Arbitration: A Single Transnational Institution?’ 25 Colum. J. Transnat’l L. 9, 16 n. 40 (1986) (noting that an award rendered by an arbitrator who communicates ex parte with an appointing party ‘may not be recognized in foreign countries’). 28  Compare A.A. de Fina, ‘The Party Appointed Arbitrator in International Arbitrations—Role and Selection’, 15 Arb. Int’l 381, 386 (1999) (‘[T]‌here is some leniency in arbitrations as to the neutrality of a party-appointed arbitrator but there is no such leniency in the absolute requirement of impartiality and independence whatever the circumstances.’); with W. Michael Tupman, ‘Challenge and Disqualification of Arbitrators in International Commercial Arbitration’, 38 Int’l & Comp. L.Q. 26, 49 (1989) (‘Unquestionably all members of the tribunal in international arbitration should be held to the same standard of independence, whether appointed by a party or not. The concept of a non-neutral arbitrator as it exists in some common law systems simply has no place [in international arbitration].’) 29  Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, ICSID Case No. ARB/05/24. 30  Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, ICSID Case No. ARB/05/24. 31  Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, ICSID Case No. ARB/05/24, para. 10. 32  Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, ICSID Case No. ARB/05/24. 33  See Michael Waibel et al. (eds.), The Backlash Against Investment Arbitration: Perceptions and Reality (2010) (analysing the current state of the international investment regime and offering various suggestions to improve the system).

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Arbitrators, Barbers, and Taxidermists complex as a host of regulatory issues, such as antitrust, securities fraud, anti-corruption and anti-money laundering laws, and intellectual property, are now routinely implicated in arbitral disputes.34 2.19 As the nature and range of disputes have expanded and diversified, arbitrators have

adjusted to the new environment. The new generation of arbitrators can no longer invoke ‘grand principles of law’ or vague notions of equity with the same innate sense of legitimacy on which the earlier generation relied.35 Instead, they have adopted a more technocratic and procedurally rigorous approach to arbitral decision-making.36 This more technocratic and managerial approach appeals to modern parties, who are drafting increasingly complex and detailed contracts,37 which they want enforced with legal precision.

2.20 The effect of these overlapping trends is that the opaque compromise-oriented decision-

makings of the past have been largely displaced by more meticulous reasoning based on the law selected by the parties. Arbitral procedures for gathering and presenting evidence and argumentation had traditionally been open-textured, subject to improvisation, and, as a practical matter, crafted on a case-by-case basis to suit the predilections of individual arbitrators in the absence of party agreement. In recent years, rules for procedure and evidence gathering have become more formal. The purpose of this formalization is to bring greater predictability for parties. Relatedly, however, it also precipitates a shift in the role of arbitrators. As James Carter explains: [N]‌ew international arbitration ‘players’ [sought] transparency in the rules, procedures and institutional arrangements [because they were] impatient with customs and understandings not accessible to them, and they [were] suspicious of the idea that there [was] or [might have been] an inner ‘club’ of practitioners and arbitrators from which they [were] excluded.38

34  Historically, most public law claims and regulatory claims, such as patent, antitrust, and securities had been considered non-arbitrable. See Philip J. McConnaughay, ‘The Risks and Virtues of Lawlessness: A “Second Look” at International Commercial Arbitration’, 93 Nw. U. L. Rev. 453, 474–5 (1999). Today, most such claims are arbitrable. See Peter B. Rutledge and Christopher R. Drahozal, ‘Contract and Choice’, B.Y.U. L. Rev. 1, 10 (2013); Paul Bennett IV, ‘“Waiving” Goodbye to Arbitration: A Contractual Approach’, 69 Wash. 8 Lee L. Rev. 1609, 1623–4 (2012) (discussing the evolution of the non-arbitrability doctrine). 35  Dezalay and Garth, Dealing in Virtue, 33–62, 89–90. 36  See Dezalay and Garth, Dealing in Virtue, 34–41 (describing the difference between ‘technocratic’ and ‘grand old’ arbitrators). 37  Yassin El-Ayouty, ‘Challenges Facing Inter-Governmental Political Negotiations Which Are Common to International Business Negotiators: An Analysis of Shared Concerns’, 3 ILSA J. Int’l & Comp. L. 829, 832 (1997) (arguing that in drafting international contracts, American parties ‘often attempt [ . . . ] to deal with every possible contingency’ (quoting Trenholme J. Griffin and W. Russell Daggatt, The Global Negotiator: Building Strong Business Relationships Anywhere in the World (1990) 109); Jeswald W. Salacuse, ‘Renegotiating International Business Transactions: The Continuing Struggle of Life Against Form’, 35 Int’l Law. 1507, 1535–6 (2001) (describing how parties write detailed contracts that ‘seek to foresee all possible eventualities’). 38  James H. Carter, ‘International Commercial Dispute Resolution’, 51-SEPT Disp. Resol. J. 94, 95, 98 (Apr./ Sept. 1996). See also Gabrielle Kaufmann-Kohler, ‘Globalization of Arbitral Procedure’, 36 Vand. J. Transnat’l L. 1313, 1322–3 (2003) (referring to the development of ‘standard arbitration procedure’ that ‘merge[s]‌different procedural cultures’); Serge Lazareff, ‘International Arbitration: Towards a Common Procedural Approach’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 31 (referring to ‘an emerging “harmonised procedural pattern” ’).

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Arbitrator selection and arbitrator services Modern developments have substantially harmonized and standardized international arbitration procedures: The arbitration world . . . has . . . articulate[d] and standardize[d] many of the aspects of international proceedings, so that newcomers will be able to find their way without undue difficulty . . . [T]‌he ‘unwritten’ procedures—those typically followed but not written into the formal rules and previously often passed down in internal administrative form—now appear in guidelines of all sorts available to the reader with access to a decent arbitration library.39

These international standards are reflected in the International Bar Association’s Rules for the Taking of Evidence in International Arbitration, as well as other practice guidelines and protocols.40 Despite efforts at harmonization and increased transparency, parties, counsel and arbitrators continue to bring a diversity of preferences and perspectives to arbitral proceedings.41 As a consequence, in addition to effective legal reasoning and case management skills, experienced modern arbitrators have also become skilled at a more cosmopolitan approach to decision-making. Arbitrators must fashion ‘arbitral procedures that do not mimic those of either party’s or counsel’s home jurisdiction, but that instead provide an internationally-neutral procedural framework’ and ‘(properly) avoid merely “splitting the difference” between competing procedural desire and proposals’.42 One side effect of more precise contracts selecting national law, and more elaborate fact-finding procedures, is a resulting increase in the length of proceedings and of the awards they produce.43 Increased transparency facilitates increased attention on the details of arbitral procedures and outcomes. Parties are more focused on procedural opportunities to prove the details of their cases, and better able to evaluate the quality of arbitral decision-making by assessing how closely the reasoning of an award hews to proffered evidence and applicable legal rules. These developments, in turn, have increased focus on who international arbitrators are and how they decide cases. In addition to these developments in international commercial arbitration, the increasing 2.21 number of disputes involving States, particularly the rise of investment arbitration, has had similar effects. Investment arbitration has dramatically raised both the stakes and challenges regarding international arbitral procedure and arbitral decision-making.44 The high-stakes and often highly politicized nature of these disputes has brought intense focus on investment arbitrators, their suitability, and potential biases in resolving these types of disputes.   Carter, ‘International Commercial Dispute Arbitration’, 98.   See Gary B. Born, International Commercial Arbitration (2014) 2269. 41  See Lara M. Pair, ‘Cross-Cultural Arbitration: Do the Differences Between Cultures Still Influence International Commercial Arbitration Despite Harmonization?’ 9 ILSA J. Int’l & Comp. L. 57, 58 (2002) (arguing that ‘despite harmonization of procedural rules . . . expectations of the process differ based on cultural background of parties or arbitrators’). 42 Born, International Commercial Arbitration 1791. 43  A limited, random sampling of the ICC awards published in the Yearbook of International Arbitration illustrates this point. The average length of ICC awards contained in the volumes for 1986 and 1987 were 5.7 pages and 8.4 pages, respectively. Flash forward to 2003 and 2004, and the average length of awards has increased to 16.5 pages and 20 pages for those years. Notably, these are excerpts of actual awards, which, according to German arbitration specialist Stephan Wilske, dramatically under-represent the length of full awards. He reports that ‘even with an amount in dispute of less than USD 1 million, a final award by ICC tribunals . . . is far beyond 50 pages and strives more in the direction of 100 pages’. Email from Stephan Wilske to author, 10 Oct. 2006 (on file with author). Wilske also notes that he receives ‘quite some awards’ with more than 100 pages. See also Donald P. Arnavas and Rt. Hon. Lord David Hacking, ‘Using ADR to Resolve International Contract Disputes’, 04-11 Briefing Papers 1 (2004). 44  See generally, Gary Born, ‘A New Generation of International Adjudication,’ 61 Duke L.J. 775 (2011). 39 40

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Arbitrators, Barbers, and Taxidermists According to some, international arbitrators bring to investment arbitration a unique skill set in international fact-finding and managing complex cross-cultural disputes that may be lacking in more traditional public international tribunals.45 According to other commentators, the fact that international arbitrators operate in a private marketplace and are selected on an ad hoc basis raises questions about their suitability for deciding investment disputes. Some critics have suggested that investment arbitrators intentionally make expansive jurisdictional rulings in an effort to increase the size of the market for their services,46 while others have accused them of being superficial (if not disingenuous) in their interpretation and application of the Vienna Convention on the Law of Treaties.47 2.22 It is not surprising that so much attention in investment arbitration is focused on the arbitra-

tors themselves.48 Investment treaties established the framework of substantive protections for foreign investors and the skeletal outlines for arbitration jurisdiction and procedures. International arbitrators, however, are the ones who have to put the meat on those bones. That power is exercised in a high-stakes environment in which the law is still evolving. There are deep disagreements about various policy issues that animate that evolution. In addition, a growing body of empirical research provides increasingly extensive data about investment arbitrators and the cases they decide.49

2.23 With this background about the field of international arbitrators and their role in both indi-

vidual arbitral proceedings and the development of arbitration law, it becomes apparent that the process for selecting arbitrators is a critically important moment in an arbitration case. Despite its critical importance, however, there are sometimes significant asymmetries and ambiguities that can undermine the fairness of the arbitrator selection process. 3.  The selection process

2.24 Gary Born has explained that the process of selecting arbitrators is ‘an historical, and dis-

tinguishing, feature of arbitration’ that ‘offer[s]‌peculiar opportunities to the parties’ and remains ‘one of the fundamental attractions of the arbitral process.’50 In a more playful description, William ‘Rusty’ Park advises that ‘Just as in real estate the three key elements are “location, location, location,” so in arbitration the applicable trinity is “arbitrator, arbitrator, arbitrator.” ’51

45  ‘Disputes’ in Catherine A. Rogers and Roger P. Alford (eds.), The Future of Investment Arbitration (2009) 313 (arguing that international arbitrators have demonstrated an aptitude in fact-finding that is often lacking in public international courts). 46  Gus Van Harten, ‘A Case for an International Investment Court’, Society of International Economic Law (SIEL) Inaugural Conference 2008 Paper (30 June 2008), . 47  Michael Waibel, ‘International Investment Law and Treaty Interpretation’, in Hofmann et al. (eds.), From Clinical Isolation to Systemic Integration (2011) 29–52, . 48  For an analysis of why investment arbitrators are a ‘lightening rod’ for interest in investment arbitration, see Catherine A. Rogers, ‘The Politics of Investment Arbitrators’, 12 Santa Clara J. Int’l L. 223 (2014). 49  Compare Susan D. Franck, ‘Development and Outcomes of Investment Treaty Arbitration’, 50 Harv. Int’l L.J. 435 (2009) (concluding based on empirical findings that ‘development status does not have a statistically significant relationship with outcome’), with Gus Van Harten, ‘Fairness and Independence in Investment Arbitration: A Critique of Susan Franck’s “Development and Outcomes of Investment Treaty Arbitration” ’ (1 Dec. 2011), (alleging methodological flaws in Franck’s research and arguing that Franck’s conclusions that there is an absence of bias are not supported by the data); Michael Waibel and Yanhui Wu, ‘Are Arbitrators Political?’ ASIL Research Forum, 5 Apr. 2011. 50  See Born, International Commercial Arbitration 1673 (referring to arbitrator selection). 51  William W. Park, ‘Income Tax Treaty Arbitration’, 10 Geo. Mason L. Rev. 803, 813 (2002).

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Arbitrator selection and arbitrator services In very real terms, selecting an arbitrator is the ultimate ‘forum shopping’.52 Conventional 2.25 forum shopping aims to select the courts or a jurisdiction in order to access certain procedural and substantive laws53 or decision-makers who are anticipated to be more favourable to a party’s case.54 By contrast, arbitrator shopping can be a more direct and effective means than traditional forum shopping of targeting procedural and substantive rules, as well as desirable features in the decisionmaker.55 Techniques for achieving these aims in the arbitrator selection process are often described 2.26 as more of an art than a science. Nevertheless, the process is governed by established rules and practices. At the same time, some of those rules and practices remain subject to debate and even confusion. More importantly, they operate in a marketplace that is often subject to profound information asymmetries. a.  The procedures for arbitrator selection Under most arbitral rules and national laws, parties can choose the number of arbitrators and 2.27 determine the mechanisms for how they will be appointed.56 Some parties or arbitral rules provide for a sole arbitrator when smaller amounts are at stake.57 In most sizable disputes,58 almost always in investment arbitration, and by default under some institutional rules, the tribunal is comprised of three arbitrators. The popularity of tri-partite tribunals is in part because they permit a diversity of national, legal, and cultural backgrounds, which ensures greater neutrality than a sole arbitrator.59 There is also a perception that three arbitrators working together are less likely to err than a sole arbitrator working alone,60 an important consideration since there is no substantive appeal process to correct errors. 52  ‘Forum shopping’ refers to selection of a particular forum or jurisdiction based on features that a litigant believes will maximize its potential to prevail. See Kimberly A. Moore and Francesco Parisi, ‘Rethinking Forum Shopping in Cyberspace’, 77 Chi.-Kent L. Rev. 1325, 1328 (2002) (‘By strategically choosing the forum, a plaintiff can maximize the expected return from litigation.’). 53  Christopher A. Whytlock, ‘The Evolving Forum Shopping System’, 96 Cornell L. Rev. 481, 488 (2011). (‘Forum shopping behaviour is based not only on a plaintiff’s preference for a particular legal system’s substantive and procedural law but also on the court access and choice-of-law decisions of courts.’). 54  Instances of parties seeking out a particular forum for a specific favourable policy or judge are well documented. See, e.g., Marsha B. Freeman, ‘Influencing Outcomes: Ethical Dilemmas in the Course of Doing Business’, 75 UMKC L. Rev. 957, 960–2 (2007) (discussing private and government strategy in choosing favourable fora for different US lawsuits); Kimberly Jade Norwood, ‘Shopping for A Venue: The Need for More Limits on Choice’, 50 U. Miami L. Rev. 267, 278–9 (1996) (discussing the reputation of different juries and judges in specific US jurisdictions for giving favourable awards). In international arbitration, parties may use a number of ingenious techniques to forum shop, albeit more seldom than in the US. See August Reinisch, ‘Part II Chapter 5: The Issues Raised by Parallel Proceedings and Possible Solutions’, in Michael Waibel, Asha Kaushal, et al. (eds.), The Backlash against Investment Arbitration (2010) 113, 114 (‘[I]‌t is almost surprising that . . . most of the other dangers associated with the proliferation of dispute settlement, such as forum shopping and multiplication of proceedings, have materialized only to a limited degree.’); Emmanuel Gaillard and Philippe Pinsolle, ‘Advocacy in Practice: The Use of Parallel Proceedings’, in Doak Bishop and Edward G. Keyhoe (eds.), 2nd edn., The Art of Advocacy in International Arbitration (2010) 173 (discussing advantages and disadvantages of parallel proceedings in multiple jurisdictions); Richard H. Kreindler, ‘Arbitral Forum Shopping’, in Bernardo M. Cremades and Julian D.M. Lew (eds.), Parallel State and Arbitral Procedures in International Arbitration (ICC, 2005) 153. 55   See Born, International Commercial Arbitration 1674. 56  See, e.g., ICC Arbitration and ADR Rules, art. 12 (2012) [ICC Rules]; UNCITRAL Arbitration Rules, art. 7 (2010); AAA Commercial Arbitration Rules and Mediation Procedures, R. 15 (2009). 57  Just under half of ICC arbitrations are generally referred to a sole arbitrator. See Born, International Commercial Arbitration 1703, n. 186 (citing 2005 to 2012 ICC Statistical Reports). 58 Born, International Commercial Arbitration 1703. 59  See Born, International Commercial Arbitration 1703–4. 60  See David Caron, et al. (eds.), The UNCITRAL Arbitration Rules: A Commentary (2006) 172 (‘the presence of a colleague sets up a dialogue that yields deliberations that are necessarily more refined and exacting. It is all

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Arbitrators, Barbers, and Taxidermists 2.28 Another critical reason for preference of a three-person tribunal is that parties have much greater

ability to shape the composition of the tribunal. In the case of a sole arbitrator, parties are rarely able to agree on the appointment of a single individual.61 With a three-person tribunal, each party has the opportunity to nominate or appoint one of the two co-arbitrators.62

2.29 The first step in selecting an arbitrator is developing a list of potential candidates. If a party

has retained one of the leading international arbitration firms, that initial list would likely be generated by the firm based on its experience in the field and familiarity with the pool of potential arbitrators. Some parties that do not retain specialized international arbitration firms63 and are unfamiliar with the pool of potential arbitrators may resort to one of several services to generate an initial list. Organizations, such as iaiparis.com, have created registers or rosters of eligible international arbitrators from which a shortlist of possible candidates can be identified.64 While these resources can be very useful for initially identifying prospective arbitrators, they operate more like a form of publicity for international arbitrators than a tool for determining which candidate is optimal for a particular dispute. These sources help sort candidates by linguistic ability, legal training, and arbitration experience. The most important information about a potential arbitrator, however, is not available in these sources.

2.30 Once potential arbitrators have been identified, parties and their counsel generally gather

information about prospective arbitrators. Some of this information is derived from formal, publicly available sources, such as publications authored by the candidates, publicly

too easy for a sole arbitrator to focus upon one particular aspect of a complex case and for his views on that aspect to not benefit from discussion.’); W. Laurence Craig et al., International Chamber of Commerce Arbitration, 3rd edn. (Oxford University Press, 2001) ¶ 12.02 (‘Having three arbitrators may assure a more thorough consideration of all the issues from different points of view.’). 61   See Lucy F. Reed, ‘Drafting Arbitration Clauses’, in International Business Litigation and Arbitration (Litigation and Administrative Practice Course Handbook Series No. 670, Practicing Law Institute, 2002) 553, 577 (noting that ‘parties locked in a dispute are rarely able to come to such an agreement’ about who should preside over an arbitration). 62   For this reason, co-arbitrators are often referred to as ‘party-appointed’ or ‘party-nominated’ arbitrators. In this book, I generally use the term ‘party-appointed arbitrators’ to refer to all types of co-arbitrators. For some contexts, the term ‘party-nominated arbitrators’ may be more precise because some arbitral rules require that an institution confirm an arbitrator selected by the parties. The term ‘party-appointed arbitrator’ is, however, more commonly used and avoids the need to separately refer to those who may be appointed by an arbitral institution or an appointing authority. Compare UNCITRAL Arbitration Rules, arts. 8–9 (2010) (allowing parties to directly appoint arbitrators), with ICC Rules, arts. 12–13 (2012) (requiring confirmation of party-appointed arbitrators). 63  A party may not retain such a firm either because they cannot afford it or because they do not understand the highly specialized nature of international arbitration practice, and mistakenly believe that the firm that handles other litigation matters can adapt to the new forum. Rates at the top firms for international arbitration practices can be extremely high, similar to top patent litigators or other highly specialized practice areas in which cases usually involve high stakes. See PricewaterhouseCoopers, Corporate Choices in International Arbitration: Industry Perspectives (Queen Mary University of London, 2013), 13, (showing that in selecting counsel for international arbitration, the majority of respondents preferred expertise in the arbitral process (55%), against the 45% that favoured industry specialism); Sudaresh Menon, Attorney General of Singapore, Keynote Address, ‘ICCA Singapore: International Arbitration: The Coming of a New Age for Asia (and Elsewhere)’ (15 June 2012), para. 35, (‘In large and complex arbitration, costs claims for legal fees and disbursements can go up to between 20 and 40 million dollars.’); Nicolas Bouchardie et al., ‘Focus on Costs in International Arbitration’, Lexology, 30 Oct. 2009, (discussing the high costs of international arbitration, particularly counsel and arbitrator fees), . 64  See, e.g., Hans Smit and Loukas Mistelis (eds.), 2nd edn., Roster of International Arbitrators (2011) [Roster].

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Arbitrator selection and arbitrator services available awards authored by the candidate, or national court cases involving their awards. The problem is that this information is not always readily available, even with diligent research. Moreover, as discussed in greater detail later,65 the information that exists is not equally available to all parties. Despite difficulties in gathering information, research into an arbitrator’s background is a 2.31 critical phase of the arbitrator selection process. After gathering information, parties sometimes also interview a prospective arbitrator, though this process is also, as described later, subject to some uncertainties. As a result of all this vetting, subject to institutional confirmation (when applicable) and challenge standards, party-appointed arbitrators are unilaterally selected based on their presumed qualities and perspectives as an arbitrator. They are, in other words, an almost ‘pure’ expression of a party’s preference in a decision-maker. Arbitral chairpersons, meanwhile, are usually selected either by agreement of the parties 2.32 or, more usually, by the two party-appointed arbitrators. Parties are, therefore, able to influence selection of the arbitral chairperson.66 Party preferences regarding chairpersons are limited, however, by their ability to secure agreement either from the opposing party or their party-appointed arbitrators. These processes may seem like they provide fair opportunities for both selecting party-appointed arbitrators and added protections to ensure the neutrality of arbitral chairpersons. Ambiguities in the procedures and related ethical norms that apply to arbitrator selection, however, suggest there is room for doubt. Considerable disagreement still exists within the international arbitration community 2.33 regarding what constitutes proper conduct during arbitrator selection. According to some commentators and sources, it is impermissible or at least unseemly to engage in any pre-appointment communication with party-appointed arbitrators, unless the other party is present.67 Other sources suggest that limited enquiries about an arbitrator’s availability and experience are permissible, but not discussions about other topics, such as prospective chairpersons. Still other sources suggest that, short of discussion of the merits of the case, interviews are permissible and advisable, including discussions about potential arbitral chairpersons.68 Finally some parties—particularly those new to arbitration or who are not represented by experienced arbitration counsel—simply do not have any meaningful strategy for how to select arbitrators.69   See paras 8.84–8.93.   In ICC arbitrations, for example, parties are much more likely to reach agreement about an arbitral chairperson than they are about a sole arbitrator. See Born, International Commercial Arbitration 1705 and nn. 193–4 (reasoning based on ICC statistics that parties on average agree on a chairperson in approximately 72% of cases for a tri-partite tribunal but on a sole arbitrator in less than 20%) (citing ICC statistics from 2012). 67  Charles H. Resnick, ‘To Arbitrate or Not to Arbitrate’, Bus. L. Today (May/June 2002) 37, 38 (advocating interviews of arbitrator candidates, but cautioning that parties ‘should do so only jointly with opposing counsel’); Francis O. Spalding, ‘Selecting the Arbitrator, What Counsel Can Do’, 2 ADR Currents Fall 1997, 8 (1998) (stating summarily that interviews ‘can be undertaken appropriately only if done jointly by counsel for all parties’). 68 Doak Bishop and Lucy Reed, ‘Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration’, 14 Arb. Int’l 395, 401 (1998). 69  See W. Lawrence Craig et al., International Chamber of Commerce Arbitration, 3rd edn. (2000); ICDR Arbitration Rules, art. 6(1) (2010) (‘The parties may mutually agree upon any procedure for appointing arbitrators and shall inform the administrator as to such procedure.’); IBA Rules of Ethics for International Arbitrators, R. 5.1. (‘In the event that a prospective sole arbitrator or presiding arbitrator is approached by one party alone, or by one arbitrator chosen unilaterally by a party (a “party-nominated” arbitrator), he should ascertain that the other party or parties, or the other arbitrator, has consented to the manner in which he has been approached.’) 65 66

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Arbitrators, Barbers, and Taxidermists 2.34 These disagreements about the process for appointing the tribunal are much more problematic

than the oft-noted disagreements about arbitral procedures.70 Disagreements about internal arbitral procedures can be submitted to the tribunal to resolve during the normal course of an arbitration. In this respect, the disagreements are transparent and subject to fair resolution. Disagreements about the arbitrator appointment process, by contrast, often remain masked in the opaque phases that precede commencement of an arbitration and appointment of the tribunal. A party may never know whether its opposing party engaged in interviews or exchanged views with its party-appointed arbitrator about the selection of the arbitral chairperson. If one party is carefully vetting prospective arbitrators, while the other is assiduously avoiding any communication with them, the process may be producing a lopsided tribunal, including a chairperson that is deliberately but covertly more preferable to one party than the other. The importance of these inconsistent practices becomes all the more troubling in light of the strategic considerations that help determine a party’s preferences in an arbitrator and asymmetries in the market for arbitrator services.

b.  Strategic considerations in selecting an arbitrator 2.35 In a recent survey, nearly 90% of respondents designated ‘reputation’ as the single most important factor in selecting an arbitrator.71 In part, these respondents were commenting on an arbitrator’s overall reputation for integrity, intelligence, diligence, and acumen. They were also, however, likely commenting on an arbitrator’s reputation regarding the particular sub-issues that are relevant to their individual case strategies. 2.36 These sub-issues might include whether an arbitrator is willing to allow or disallow certain

procedures (such as interim relief, joinder of third parties,72 and document exchange), has strong case management skills, adopts a strict constructionist (or a more flexible) approach to contract interpretation, is willing to assert (or reject) an expanded view of arbitral jurisdiction, and the like. At a more general level, parties generally understand that the right arbitrator can affect such pivotal issues as the seat of the arbitration (in the absence of party

70  See Serge Lazareff, ‘International Arbitration: Towards a Common Procedural Approach’, in Stefan N. Frommel and Barry A.K. Rider (eds.) Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 31 (noting an increasing awareness among both arbitrators and practitioners of a ‘harmonised procedural pattern’ in international arbitration); Berthold Goldman, ‘The Application of Law: General Principles of Law—The Lex Mercatoria’ in Julian D.M. Lew, (ed.), Contemporary Problems in International Arbitration (1986) 124; Christian Borris, ‘The Reconciliation of Conflicts Between Common Law and Civil Law Principles in the Arbitration Process’ in Stefan N. Frommel and Barry A.K. Rider (eds.) Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 1, 13–14. 71  See PricewaterhouseCoopers, Corporate Choices in International Arbitration: Industry Perspectives (Queen Mary University of London 2013), 22, (85% of organizations surveyed believed ‘reputation’ to be an important factor in nominating a co-arbitrator); White and Case, 2010 International Arbitration Survey: Choices in International Arbitration (Queen Mary University of London 2010), 25, 26, (54% and 52% of those surveyed chose ‘reputation’ as a top influence in choosing sole arbitrators or co-arbitrators, respectively). 72  See Bernardo M. Cremades and Ignacio Madalena, ‘Advocacy from the Perspective of the Civil Law Arbitrator’, in Doak Bishop and Edward G. Keyhoe (eds.), 2nd edn., The Art of Advocacy in International Arbitration (2010) 585, 585 (‘Within the broad mandatory limits of the seat, parties and arbitrators enjoy a high degree of freedom and discretion in designing the proceeding.’). See also S.I. Strong, ‘Intervention and Joinder as of Right in International Arbitration: An Infringement of Individual Contract Rights or a Proper Equitable Measure?’ 31 Vand. J. Transnat’l L. 915, 933 (1998).

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Arbitrator selection and arbitrator services agreement),73 the choice of substantive law,74 the nature and extent of hearings,75 and the allocation of costs.76 Tribunals, of course, ultimately decide the substantive outcomes of the case. Particular fea- 2.37 tures of their personal background and experiences or views on policy might also therefore be highly relevant, particularly in investment arbitration cases or cases that otherwise implicate policy issues. A party’s preference among otherwise competent arbitrators inevitably turns on the perceived strategic advantages implicated by these different considerations. Some observers may consider it unseemly to discuss strategic considerations in the arbitra- 2.38 tor selection process. A very real tension exists between intentionally strategic behaviour in selecting arbitrators and the requirements that individual arbitrators be impartial and that the wholly constituted tribunal be fair and neutral. The nature of the apparent tension, and related conceptualizations of impartiality, are analysed later in Chapter 8. This chapter focuses on the existing state of international arbitration practice. Any examination of existing practices cannot ignore or deny the strategic considerations and behaviour that occur in virtually every arbitration. As already noted, the opportunity to affect the constitution of the tribunal is one of the 2.39 primary reasons parties agree to arbitrate in the first place. The ability to intentionally select the individuals who will serve as arbitrators is a benefit that parties are generally unwilling to relinquish, even in light of procedures that permit tribunals to be appointed by an arbitral institution or other appointing authority.77 73   See Born, International Commercial Arbitration 2151 (in the absence of party agreement, the arbitral tribunal may select the seat). 74   In the absence of party agreement on applicable law, arbitrators select the applicable law. Even when the parties choose applicable law, an arbitral tribunal may consider application of other law either to fill gaps or take account of applicable mandatory law. See Born, International Commercial Arbitration 2744 (explaining that when a choice-of-law clause exists, enforcement, exceptions, and application of that clause are often decided, in the first instance, by the arbitrators); Emmanuel Gaillard and John Savage (eds.), Fouchard, Gaillard, Goldman on International Commercial Arbitration (1999) ¶ 1533 (‘There is no doubt that arbitrators are entitled to disregard the provisions of governing law chosen by the parties where they consider provisions to be contrary to international public policy.’); Homayoon Arfazadeh, ‘In the Shadow of the Unruly Horse: International Arbitration and the Public Policy Exception’, 13 Am. Rev. Int’l Arb. 43, 59 (2002) (‘In practice . . . international arbitrators often feel constrained to apply the domestic public policy rule of the country whose courts can effectively review, quash and vacate the final award under the “second look” doctrine, regardless of its “application worthiness”.’); Yves Derains, ‘Public Policy and the Law Applicable to the Dispute in International Arbitration’, in Pieter Sanders (ed.), Comparative Arbitration Practice and Public Policy in Arbitration (1987) 227, 255 (suggesting that arbitrators must keep an eye toward the mandatory law of the like enforcement jurisdiction or jurisdictions to ensure that their award is enforceable); William W. Park, ‘National Law and Commercial Justice: Safeguarding Procedural Integrity in International Arbitration’, 63 Tul. L. Rev. 647, 649 (1989) (same). See also Eric A. Posner, ‘Arbitration and the Harmonization of International Commercial Law: A Defense of Mitsubishi’, 39 Va. J. Int’l L. 647, 668 (1999) (‘The evidence suggests that international arbitrators are deeply concerned about their reputation for respecting mandatory rules.’). 75  See Born, International Commercial Arbitration 2323 (‘It is the overwhelming practice, confirmed by all leading institutional arbitration rules, for tribunals to make provision for oral evidentiary proceedings.‌’). 76  See Born, International Commercial Arbitration 2366 (explaining tribunal discretion in matters of determining costs); John Yukio Gotanda, ‘Awarding Costs and Attorneys’ Fees in International Commercial Arbitrations’, 21 Mich. J. Int’l L. 1, 1-3 (1999) (noting that an overwhelming number of countries permit arbitrators to award costs and fees, which often run into the millions of dollars). 77  The International Institute for Conflict Prevention and Resolution (CPR) is not often involved in the selection of neutrals. See ‘The International Institute for Conflict Prevention & Resolution’, 15 IBA Arb. News 121, 122 (2010) (illustrating that even in the most complex technology and technical areas, parties only ask CPR to aid in arbitrator selection 24% of the time). According to CPR’s website: ‘Selection of arbitrators by the parties is the preferred course, and the parties are given ample opportunity to select a Tribunal without the assistance of

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Arbitrators, Barbers, and Taxidermists 4.  Imperfections in the market for international arbitrators 2.40 While international arbitration has grown and the number of arbitrators has expanded,

several factors hinder the development of a competitive and open market for arbitration services.78 First, even with expansion, the field continues to be dominated by an elite group of insiders. These individuals effectively control all the most prominent arbitration organizations and associations through which aspiring arbitrators gain prominence. The rise of young arbitrator groups, such as Young ICCA, the ICC Young Arbitrators Forum, and the Paris Very Young Arbitration Practitioners, as well as intentional efforts from within, have improved diversity in professional opportunities available to aspiring arbitrators. But international arbitration events still thrive on the participation of revered icons. It is their presence and pronouncements that tend to capture attention and headlines.

2.41 In addition to the significant barriers to entry, there are also severe information asymmetries

that prevent the market for arbitrator services from being functionally competitive and efficient. While there is a notable trend toward greater transparency,79 most arbitration is confidential, most awards are not published, and until recently most institutional decisions regarding challenges to arbitrators are rendered without reasoned explanation and without publication.80 The combined effect of these features is an opacity about critical information that parties need to make fully informed decisions in selecting arbitrators.81

2.42 For example, information about an arbitrator’s past decisions or challenges may become

‘public’ when an arbitrator is challenged in a judicial proceeding or at the award enforcement stage. Even if judicial proceedings are technically available to the public (and they are not in all legal systems), they are not necessarily readily accessible to most parties. In the United States and most other common law jurisdictions, judicial opinions are published and (particularly in the United States) are electronically searchable. As a result, if an arbitrator candidate’s conduct or work product had been the subject of challenge in a US court, an English-speaking party (or their English-speaking counsel) has easy access to the relevant information. Absent these preconditions, however, linguistic, cultural, and practical barriers present formidable obstacles to the decisional history and past conduct of arbitrator candidates.

a Neutral Organization.’ See CPR, 2007 CPR Rules for Non-Administered Arbitration, CPR Clauses, Rule 6 (2007); CPR, 2007 CPR Rules for Non-Administered Arbitration of International Disputes, CPR Clauses, Rule 6 (2007), ; AIDA Reinsurance and Insurance Arbitration Society (ARIAS-US), Neutral Selection Procedure, . 78  See Alan Scott Rau, ‘The Arbitrability Question Itself ’, 10 Am. Rev. Int’l Arb. 287, 365 n. 218 (1999) (doubting the existence of competitive forces in the market for arbitrators). 79  See Catherine A. Rogers, ‘Transparency in International Commercial Arbitration’, 54 Kansas L. Rev. 1301 (2006). 80  See W. Lawrence Craig, William W. Park, and Jan Paulsson, International Chamber of Commerce Arbitration, 3rd edn. (2000) § 13.03 [hereinafter ICC Arbitration] (noting that despite acknowledged ambiguities in terms like ‘independent’, the ICC has declined to publish criteria defining the meaning of such terms or adopt the IBA’s guidelines in this area). One notable exception to opacity of institutional challenge procedures is the CPR, which publishes the specific procedures used for evaluating challenges to arbitrators, even if it appears that the outcome of those procedures remain unpublished. 81  ‘This observation has frequently been confirmed: acquiring information about arbitrators is costly, and parties may not have substantial resources to invest in learning about the reputations of arbitrators or arbitral institutions. Moreover, arbitrations often take place under the guise of confidentiality, so even assuming that a party were willing to undertake the investment, the party may be stymied in its efforts to learn much about an arbitrator’s or an institution’s reputation.’ Peter B. Rutledge, ‘Toward a Contractual Approach for Arbitral Immunity’, 39 Ga. L. Rev. 151, 195 (2004).

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Arbitrator selection and arbitrator services Some of the best and most reliable information about an arbitrator is derived from direct 2.43 participation with that person in arbitral proceedings. The value of such information is one reason why service as an arbitrator is a valuable tool for developing business as a lawyer as it gives the lawyer unique insights about the qualities of arbitrators who served on the same tribunal. These sources of information about an arbitrator’s conduct and decisional track record are by definition most available to a relatively small group of arbitration insiders who, not surprisingly, treat this valuable information as proprietary.82 One effect of this largely closed marketplace is that it is easier to find critical information 2.44 about insiders and more difficult to assess new arbitrators. The difficulties in obtaining information combine with the fact that prior service as an arbitrator is the pre-eminent qualification for an arbitrator-candidate83 to create a relatively closed circle of arbitrators that is difficult for aspiring new arbitrators to penetrate.84 Market imperfections usually signal a need for correction through some form of regulation. 2.45 The response to existing imperfections in the international arbitrator market, however, has to date been largely private and ad hoc. Major law firms and corporations (as well as arbitral institutions) maintain private, internal databases that catalogue essential information about arbitrators. These private libraries of information about arbitrators exacerbate the existing information asymmetries and the advantages that insiders gain from practical experience. While to date information asymmetries have predominantly benefitted arbitration insiders, an 2.46 ‘outsider’s revenge’ may be in the making. As described in Chapter 1, the largest growth in new cases filed is occurring in regional arbitration centres. Moreover, a long-term solution to perceptions of bias and concerns about lack of diversity among arbitrators will necessarily mean appointments of new arbitrators from outside the well-worn North American and European circles.85 As newer arbitrators arrive from outside the major cities in Europe or North America, international arbitration insiders may find themselves on the wrong end of information asymmetries, unable to find reliable public information about potential arbitrators. Regardless of whether or when an ‘outsider’s revenge’ emerges, the existing information 2.47 asymmetries, combined with procedural asymmetries discussed in the last section, have a number of negative consequences. They unnecessarily raise costs in a process that is already

82  As one commentator explains: ‘Not surprisingly, there are potential difficulties in obtaining anecdotal information about arbitrator candidates. Some individuals and firms regard this information as confidential or proprietary; some limit the availability of this type of intelligence to a circle of close, professional friends or colleagues; and in a day when everyone is bombarded by unwanted enquiries, there may be resistance to the effort involved in digging out and forwarding such information, even when there is no other reason to withhold it.’ Francis O. Spalding, ‘Selecting the Arbitrator, What Counsel Can Do’, ADR Currents, Fall 1997, 8, reprinted in What the Business Lawyer Needs to Know About ADR (Litigation and Administrative Practice Course Handbook Series No. 578, Practicing Law Institute, 1998) 351, 355. 83  See Eric W. Lawson, Jr., ‘Arbitrator Acceptability’, 23 (arguing that previous service as an arbitrator ‘is the sine qua non, for there is no other recognized route of entry into the profession of arbitration’). 84  Dezalay and Garth provide an explanation for what appears to be a contradiction between expansion of the field, on the one hand, and barriers to entry and maintenance of control by a tight in-group on the other. They explain that the influx of newcomers, while participating intermittently in individual arbitrations, remain on the periphery of the field of international arbitration practice. Dezalay and Garth, Dealing in Virtue, 37. 85  Sudaresh Menon, Attorney General of Singapore, ‘Keynote Address ICCA Singapore: International Arbitration: The Coming of a New Age for Asia (and Elsewhere)’ (15 June 2012), paras 32, 74–76, .

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Arbitrators, Barbers, and Taxidermists criticized for being too expensive. They hinder the growth and development of new arbitrators at a time when the leading arbitrators are arguably over extended and (reputedly) turning down cases with some frequency. Most importantly, these information asymmetries squander international arbitration’s precious legitimacy and perceptions of its efficacy and fairness. 2.48 In response to these and other concerns about arbitrator conduct, a number of new sources

have emerged to guide and regulate arbitrator conduct. The next section surveys those sources, while Chapter 6 assesses how they developed over time and fit into a larger regime of self-regulation of international arbitrators. Chapter 8 meanwhile proposes reforms to redress existing information asymmetries, including a new resource called Arbitrator Intelligence.

B.  Sources of international arbitrators’ ethical duties 2.49 Historically, the primary if not only source of arbitrators’ ethical obligations was their inter-

nal and shared sense of duty. The expansion and diversification of the field of international arbitrators, described earlier, has broken down traditionally shared assumptions about professional conduct. At the same time, disputes, as well as law firms and corporate parties, have become larger and their structures more complex. This increased size and complexity has led to new and more subtle questions about what might constitute a conflict of interest.86 Just as questions about arbitrator ethics are becoming more complex and challenging, increased formality and transparency in international arbitral procedures has raised parties’ expectations. Today, parties are unwilling to leave delicate issues of impartiality to arbitrators’ unchecked personal discretion. The arrival of third-party funders, and ambiguities about their participation in arbitral processes, have also raised new issues and magnified existing concerns.

2.50 Two main themes emerge out of the shift to more formalized mechanisms. On the one

hand, more sources of regulation do not in themselves necessarily lead to clearer standards. The content of specific standards regarding arbitrator ethics and the need for clearer concepts and definitions will be explored in greater detail later in this chapter and again in Chapter 8. The remainder of this section surveys and compares the sources of arbitrator ethical duties.

2.51 A second theme that emerges out of this survey of sources, and will be further explored in

Chapter 6, is that the most effective regulation occurs at the international level and operates within arbitration processes. The most precise and effective ethical norms were developed through actual practices by international bodies and institutions. National standards and enforcement mechanisms operate as a limited, final backstop. In this respect, arbitrator

86  These trends are summarized well in the introduction to the IBA Guidelines on Conflicts of Interest in International Arbitration: ‘Problems of conflicts of interest increasingly challenge international arbitration. Arbitrators are often unsure about what facts need to be disclosed, and they may make different choices about disclosures than other arbitrators in the same situation. The growth of international business and the manner in which it is conducted, including interlocking corporate relationships and larger international law firms, have caused more disclosures and have created more difficult conflict of interest issues to determine. Reluctant parties have more opportunities to use challenges of arbitrators to delay arbitrations or to deny the opposing party the arbitrator of its choice.’ IBA Guidelines on Conflicts of Interest in International Arbitration (2004), .

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Sources of international arbitrators’ ethical duties regulation illustrates a form of ‘self-regulation’ that will provide a model for regulation of other participants in later chapters. 1.  Arbitral institutions and rules Arbitral rules drafted by arbitral institutions to govern the arbitration proceedings necessarily 2.52 include procedures for appointing and challenging arbitrators. Some other organizations and professional arbitration associations87 also provide administrative support and resources for parties resolving their disputes under the auspices of their rules. Arbitral rules generally provide for when and how parties may select arbitrators, for what 2.53 happens when a party fails to nominate or appoint an arbitrator, and for procedures when the parties cannot agree about the appointment of an arbitrator. All arbitral rules also impose on arbitrators an obligation that they be independent from the parties, impartial, or both.88 For example, Article 11 of the ICC Arbitral Rules provides that ‘every arbitrator must be and remain impartial and independent of the parties involved in the arbitration.’89 Similarly, Article 5(2) of the London Court of International Arbitration (LCIA) Rules provides that ‘all arbitrators conducting an arbitration under these Rules shall be and remain at all times impartial and independent of the parties[.]‌’90 Obligations of independence and impartiality are enforced through requirements in most 2.54 arbitral rules that arbitrators disclose potential conflicts prior to appointment91 and, in some institutions, affirm their independence by signing a statement attesting to such independence.92 Even the most recent version of the United Nations Commission on International Trade Law (UNCITRAL) Rules now includes a model statement of independence that arbitrators are required to complete.93 Some institutions also require that, concomitant with their duty to disclose, arbitrators 2.55 have a duty to investigate potential conflicts of interest.94 The primary purpose of disclosure 87  There are several organizations that exist to promote arbitration, oftentimes in specific industries, which do not administer arbitrations. In some instances, they may act as an appointing authority and in other instances provide training for arbitrators and arbitral rules for parties. Examples of such organizations include the International Institute for Conflict Prevention and Resolution (CPR), Chartered Institute of Arbitrators (CIArb), Financial Industry Regulatory Authority (FINRA), and so on. 88   As Gary Born notes, ‘the distinction between “independence” and “impartiality” is often given undue importance’. Born, International Commercial Arbitration 1815. 89   ICC Arbitration Rules, art. 11(1) (2012). 90   LCIA Arbitration Rules, art. 5.2 (1998). 91   See, e.g., ICC Arbitration Rules, art. 11(2) (2012); LCIA Arbitration Rules, art. 5.3 (1998); WIPO Arbitration Rules, art. 22 (2002); AAA/ABA Commercial Arbitration Rules, R. 16 (2010); SIAC Rules, R. 10.4 (2013); HKIAC Administered Arbitration Rules, art. 11.4 (2013). 92   See, e.g., ICC Rules, art. 11(2) (2012) (requiring arbitrator to sign a declaration of impartiality and independence); LCIA Arbitration Rules, art. 5.3 (1998) (same); AAA Commercial Arbitration Rules, R. 16 (2010) (requiring arbitrators to disclose any circumstance likely to give rise to justifiable doubt as to the arbitrator’s impartiality or independence); ICSID Arbitration Rules, R. 6(2) (2006) (statement confirming they have not had any ‘past and present professional, business and other relationships (if any) with the parties’ as well as ‘any other circumstance that might cause my reliability for independent judgment to be questioned by a party’). 93  UNCITRAL Arbitration Rules, art. 11 (2010). 94  See, e.g., ABA/AAA, Code of Ethics for Arbitrators in Commercial Disputes, Cannon II.B (2004) [AAA/ ABA Code of Ethics] (‘Persons who are requested to accept appointment as arbitrators should make a reasonable effort to inform themselves of any interests or relationships [that may give rise to conflict].’); FINRA Rules: Code of Arbitration Procedures for Customer Disputes, R. 12405 (2008) (‘Each potential arbitrator must make a reasonable effort to learn of, and must disclose to the Director, any circumstances which might preclude the arbitrator from rendering an objective and impartial determination in the proceeding’); FINRA Rules: Code of Arbitration for Industry Disputes, R. 13408 (2007) (same).

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Arbitrators, Barbers, and Taxidermists obligations and statements of independence are to enable institutions and ‘parties to ascertain whether prospective arbitrators satisfy applicable standards of independence and impartiality’ and for parties ‘to exercise their challenge rights if they believe that these standards are not satisfied.’95 2.56 Although ‘independent’ and ‘impartial’ are terms that have remained constant in arbitral

rules, the meaning and mechanisms for enforcing those standards have evolved over time, largely in response to perceived changes in party expectations and the market for dispute resolution services. These changes are represented both in how the standards are articulated in the arbitral rules, as well as what arbitrators are required to disclose during the appointment process.

2.57 One of the most dramatic shifts was in the revisions in 2004 to the American Arbitration

Association and the American Bar Association Code of Ethics for Arbitrators in Commercial Disputes (AAA/ABA Code of Ethics) and the AAA arbitral rules. These revisions were in response to recognition that the former standards, which permitted non-neutral party-appointed arbitrators, were ‘no longer useful or realistic.’96 The AAA/ABA Code of Ethics and AAA Commercial Arbitration Rules were revised to impose the same ethical obligation of neutrality on all arbitrators, including co-arbitrators,97 unless the parties agreed to the contrary.98

2.58 The ICC Rules were also subject to extensive revisions to arbitrators’ duty of independence

and related disclose obligations. Originally, the ICC Rules had no express requirement that an arbitrator disclose any potential conflicts of interest.99 The lack of disclosure continued all the way through the 1975 revision.100 Then, in the 1988 version of the ICC Rules, this omission was replaced by a rule that required only that an arbitrator disclose information that the parties believe called his or her independence into question.101The 1988 version of the ICC Rules required that arbitrators disclose any facts or circumstances that ‘might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties.’102 The 1998 ICC Rules placed the same disclosure requirements on arbitrators as the 1988 Rules.103 The legislative history of the ICC Rules make clear, however, that omission of an express ‘impartiality’ requirement did not imply that arbitrators could

 Born, International Commercial Arbitration 2042.   John D. Feerick, ‘The 1977 Code of Ethics for Arbitrators: An Outside Perspective’, 18 Ga. St. U.L. Rev. 907, 919 (2002) (quoting Introduction to AAA/ABA Code of Ethics for Arbitrators in Domestic and International Commercial Disputes (Working Draft, 2001)). 97  AAA/ABA Code of Ethics, Canons IX and X; Ben H. Sheppard, ‘A New Era of Arbitrator Ethics for the United States: The 2004 Revision to the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes’, 21 Arb. Int’l 91, 93–95 (2005); §11.05[E]‌[2][b]. 98  AAA/ABA Code of Ethics, Canon X; AAA Commercial Arbitration Rules, R-12(b), R-17 (2010). 99  W. Lawrence Craig et al., International Chamber of Commerce Arbitration, 3rd edn. (2000) § 13.03, 210 (describing how the former Secretary General of the Court of Arbitration submitted an affidavit to a court explaining that later rules made explicit the long-standing ICC practice of requiring independent arbitrators). 100  See International Chamber of Commerce: Rules for the ICC Court of Arbitration (1975 Revision), 15 Int’l Legal Materials 395 (Mar. 1976). 101  See Craig et al., International Chamber of Commerce Arbitration, 214 and n. 26. 102  See ICC Rules of Arbitration, art. 2.7 (1988), . 103  See ICC Rules of Arbitration, art. 7(2) (1998), . See also ICC Rules of Arbitration, art. 7(3) (requiring disclosure of same information discovered later in proceedings). 95 96

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Sources of international arbitrators’ ethical duties be partial.104 The 2012 ICC Rules brought additional changes, which now provide that ‘every arbitrator must be and remain impartial and independent of the parties involved in the arbitration’.105 The 2012 ICC Rules also impose expanded requirements for disclosure. Under the rules, 2.59 arbitrators must ‘disclose in writing to the Secretariat 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, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality’.106 The ICC’s revised statement of independence (now titled ‘Statement of Acceptance, Availability, Impartiality and Independence’) also requires disclosure by an arbitrator of his/her or other professional commitments. Among other things, the ICC form specifically requires disclosure of the prospective arbitrator’s pending caseload, including numbers of arbitrations as counsel, co-arbitrator, and sole or presiding arbitrator. Critics have suggested that disclosure of this information provides limited and potentially mis- 2.60 leading reassurance to the ICC and parties. They argue that the decisive issue is the arbitrator’s capacity to handle the matters in question, which is seldom reflected in abstract statistics about caseload. These progressive amendments to the ICC Rules, however, both expand the scope of disclosure and, implicitly, reduce arbitrator discretion in determining what to disclose. One of arbitral institutions’ most critical functions is in their control over the processes for 2.61 appointing and challenging arbitrators. The mechanics of arbitrator challenges are managed primarily by arbitral institutions, which apply their own substantive and procedural rules. As Gary Born explains, control over the challenge process by arbitral institutions and 2.62 appointing authorities is ‘generally preferable to decisions by national courts . . . because they are resolved very expeditiously (which minimizes possible delays or uncertainties to the proceeding) by persons with substantial experience in such matters (which makes decisions more reliable and predictable)’.107 More directly and immediately than national courts, arbitral institutions have a vested interest in ensuring that their decisions on challenges protect the integrity of the arbitral process and ensure the enforceability of resulting awards.108 Although procedures vary somewhat among institutions, typically, a party challenging an 2.63 arbitrator must provide notice to the institution,109 which is either accepted by the opposing party or the arbitrator, or supplemented in writing. Both the opposing party and the challenged arbitrator typically submit responses.110 The institution generally decides the challenge quickly and issues its decision without reasons in a letter that purports to be final 104  See Born, International Commercial Arbitration 1870. See also Yves Derains and Eric Schwartz, Guide to the ICC Rules of Arbitration, 2nd edn. (2005) 116 (Although the word ‘impartiality’ was not itself used in the Rules, the prevention of partiality was clearly its primary object.); Dominique Hascher, ‘ICC Practice in Relation to the Appointment, Confirmation, Challenge and Replacement of Arbitrators’, 6(2) ICC Ct. Bull. 4, 5–6 (1995). 105  ICC Arbitration Rules, art. 11(1) (2012). 106  ICC Arbitration Rules, art. 11(2). 107  See Born, International Commercial Arbitration 1962. 108  Report of the UNCITRAL on the Work of Its Eighth Session, UN Doc. A/10017, Annex I para. 83, VI Y.B. UNCITRAL 1, 33 (1975) (‘Experience had shown that arbitral institutions and appointing authorities acted with complete impartiality even when one of their appointees was challenged. Such institutions and appointing authorities were deeply concerned with preserving their reputation for integrity’). 109  In ad hoc arbitration, notice is provided to the appointing authority or tribunal. 110  ICC Arbitration Rules, art. 14(3) (2012); SCC Arbitration Rules, art. 15(3) (2010); VIAC Rules of Arbitration, art. 20(3) (2013).

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Arbitrators, Barbers, and Taxidermists and binding on the issue.111 As described in further detail later, national courts may conduct an independent review of the same basis for challenge, but that review is usually under national law, not the standards and procedures established and applied by arbitral institutions. The expedited treatment of challenges by appointing authorities reflects the fact that ‘the potential for abuse of the challenge proceedings is great and thus manifestly deficient challenges should simply and quickly be declared inadmissible’112 and that the existence of pending challenges can delay the arbitral proceeding. 2.64 Notwithstanding the important role of arbitral institutions in managing arbitrator appoint-

ments and challenges, there is a pervading lack of transparency. That lack of transparency has raised some concerns, but also prompted responses to those concerns.

2.65 The decision of whether and how to challenge an arbitrator can implicate difficult strate-

gic considerations for the parties. If the challenge is unsuccessful, the challenged arbitrator remains on the tribunal to decide the merits of the dispute. The system is premised on an assumption that arbitrators’ sense of professionalism precludes them from maintaining a grudge in subsequent proceedings. At a human level, it is difficult to imagine that the spectre of a failed challenge does not linger in the minds of either the party or the arbitrator. A party’s concerns about partiality, therefore, may be heightened after an unsuccessful challenge.113 For arbitrators, being challenged is generally an uncomfortable process. Their conduct and potentially their integrity are being questioned in front of their colleagues. The prospect of professional embarrassment can be quite real, even for the most esteemed and established arbitrators.

2.66 An unsuccessful challenge may also raise questions about whether a party was acting based

on a good faith concern or on a bad faith effort to delay the proceedings. Whatever residue might remain from a failed challenge is all the more palpable if a party preserves the basis for the challenge to potentially reassert it later in a challenge to the award.

2.67 The most effective way to reduce unsuccessful challenges and their potential for unpleasant

side effects is to make outcomes of potential challenges more predictable by clarifying standards. There have been some important efforts in this regard. As described previously, several institutions have expanded the scope of disclosure obligations. The standards under institutional rules, however, remain vague, qualitative standards. One exception is in arbitration administered by the AAA, where arbitrators are required to abide by the AAA/ABA Code of Ethics. As analysed in greater detail here, the AAA/ABA Code specifies arbitrator obligations using more quantitative specifics about the types of relationships and time frames that require disclosure or disqualification. In contrast, the meaning of terms such as ‘independence’ and ‘impartiality’, as well as common modifiers such as ‘justifiable doubts’ and ‘in the 111  See, e.g., 2012 ICC Arbitration Rules, art. 11(4) (2012) (‘The decisions of the Court as to the appointment, confirmation, challenge or replacement of an arbitrator shall be final and the reasons for such decisions shall not be communicated.’); LCIA Rules, art. 29(1) (1998) (‘The decisions of the LCIA Court with respect to all matters relating to the arbitration shall be conclusive and binding upon the parties and the Arbitral Tribunal. Such decisions are to be treated as administrative in nature and the LCIA Court shall not be required to give any reasons.’). 112  David Caron, et al. (eds.), The UNCITRAL Arbitration Rules: A Commentary (2006) 272. 113  The AAA rules seek to avoid this problem by not providing notice to a proposed or sitting arbitrator if he or she has been challenged. Although designed to reduce potential negative effects of a failed challenge, critics argue that the approach of the AAA Rules is highly unsatisfactory as it precludes an arbitrator from providing potentially helpful information about the alleged conflict. See Born, International Commercial Arbitration 1964.

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Sources of international arbitrators’ ethical duties eyes of the parties’, do not always provide clear guidance in light of particular facts, especially in cross-cultural settings. One important response by institutions to increased criticism from commentators and par- 2.68 ties about the lack of transparency,114 is increasing trend efforts to publish the reasoning behind institutional decisions on arbitrator challenges. The most important development is the publication in 2011 of abstracts of LCIA decisions on arbitrator challenges between 1996 and 2010.115 It was a difficult task because the decisions were necessarily published in redacted form. Publication decisions required a delicate balance between providing enough information so that the nature of the challenge and ruling could be understood, and protecting parties’ interests and expectations of confidentiality. Even among experienced counsel and arbitrators, this effort was extolled as a ‘landmark 2.69 decision’116 that would provide a ‘treasure trove of learning on how the somewhat abstract standards of independence and impartiality have been applied in practice’.117 As one arbitration specialist explains, the publications ‘will help parties make informed challenges, rather than doing it on the blind’, and ‘remove a lot of supposition and guesswork’ in determining whether it is practical to make a challenge.118 In addition to providing needed guidance to parties, the effort is also regarded as promoting confidence in the LCIA’s decision-making on challenges, discouraging purely tactical challenges, and providing arbitrators with clearer guidance for their own conduct. The ICC stands out in its continued resistance to providing any reasons or explanations to the 2.70 parties about the basis for rulings on challenge decisions. The stated reason for this reluctance is that challenge decisions are based on a vote by the Court of Arbitration, which has over 100 members. While they are all presented the same report by the Secretariat regarding a particular challenge, the ICC maintains that it is not possible to explain the actual basis of a collective decision by so many court members. Rather than satisfying critics, this explanation seems to beg the question of why the ICC continues to subject these decisions to a vote by such a large and unaccountable body, particularly when there are some anecdotal reports of past efforts to improperly ‘lobby’ court members regarding certain challenge decisions. Nevertheless, even the ICC has felt pressure to clarify the bases for its rulings on arbitrator 2.71 challenges. As a result, the ICC has published a series of progressively more detailed reports about its decisions on arbitrator challenges.119 The ICC’s report in 2008 (shortly after the

114  See, e.g., Gary Born, ‘Institutions Need to Publish Arbitrator Challenge Decisions’, Kluwer Arb. Blog (10 May 2010), . 115  See LCIA, 27(3) Arb. Int’l (Special Edition: Arbitrator Challenges) (2011) (list of cases available at Jacob Katz Kogan, Int’l L. Rep. (7 Dec. 2011), ). 116  Nick Gray and Deborah Crosbie, Slaughter & May, ‘Winds of Change? The pending publication of LCIA reasoned decisions on arbitral independence’ (Apr. 2009), . 117  ‘LCIA to publish challenge awards’, Global Arb. Rev. (1 June 2006), (quoting William Rolwey QC). 118  ‘LCIA to publish challenge awards’, Global Arb. Rev. (1 June 2006), (quoting Barrister Klaus Reinhart). 119  See Stephen R. Bond, ‘The Experience of the ICC in the Confirmation/Appointment Stage of an Arbitration’, in The Arbitral Process and the Independence of Arbitrators, (ICC Pub. No. 472, 1991) 9; Dominique

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Arbitrators, Barbers, and Taxidermists LCIA announced that it would be publishing redacted versions of its challenge decisions) is by far the most detailed, providing summaries of circumstances and decisions in selected cases. The Stockholm Chamber of Commerce has also been publishing summary reports of its challenge decisions.120 2.72 Under most institutional rules, institutions’ rulings on appointment of and challenges to

arbitrators are deemed to be ‘final’ or ‘conclusive.’121 Some courts and commentators have interpreted these provisions (finality clauses) as reserving for institutions the exclusive power to make rulings on arbitrator appointments and challenges, or as a party agreement to preclude interlocutory intervention by national courts with respect to arbitrator challenge and appointment. Under this interpretation of finality clauses, there is still a question of whether they will be treated as effective by national courts. For example, based on this interpretation of the ICC finality clause, the English court in AT&T Corp. v Saudi Cable Co. answered the question in the negative: ‘I do not accept the view . . . [that] the finality provision [in Article 7(4) of the 1998 ICC Rules] means that the English courts have no power to review the decision of the ICC Court’ in a challenge to an arbitrator.122 The court also indicated that the conclusions of an arbitral institution in challenge proceedings would ordinarily be accorded substantial deference.123 This analysis is amiss both in its suggestion that the court will ‘review’ the ICC’s decision, as opposed to the underlying facts giving rise to questions of impartiality, and that it should ‘defer’ to that decision. The origin of the problem is that the court both overreads the finality clause and misconstrues the effect of the ICC’s decision on its own review.

Hascher, ‘ICC Practice in Relation to the Appointment, Confirmation, Challenge and Replacement of Arbitrators’, 6(2) ICC Ct. Bull. 4, 16 (1995); Anne Marie Whitesell, ‘Independence in ICC Arbitration: ICC Court Practice Concerning the Appointment, Confirmation, Challenge and Replacement of Arbitrators’, ICC Ct Bull Special Supp. (2008). 120   Marie Johansson, ‘Decisions by the Arbitration Institute of the Stockholm Chamber of Commerce Regarding Challenge of Arbitrators’, 2 Stockholm Arb. Rep. 180-82 (1999); Marie Öhrström, ‘Decisions by the SCC Institute Regarding Challenge of Arbitrators’, 1 Stockholm Arb. Rep. 46–48 (2002); Annette Magnusson and Hanna Larsson, ‘Recent Practice of the Arbitration Institute of the Stockholm Chamber of Commerce—Prima Facie Decisions on Jurisdiction and Challenges of Arbitrators’, 2 Stockholm Arb. Rep. 70–73 (2004); Helena Jung, ‘SCC Practice: Challenges to Arbitrators SCC Board Decisions 2005–2007’, 1 Stockholm Int. Arb. Rev. 5–6 (2008); Niklas Lindström, ‘Challenges to Arbitrators—Decisions by the SCC Board during 2008–2010’, 5 SCC Newsletter (2011); Felipe Mutis Tellez, ‘Arbitrators’ Independence and Impartiality: A Review of SCC Board Decisions on Challenges to Arbitrators (2010–2012)’, Electronic Library of the Arbitration Institute of the Stockholm Chamber of Commerce (2013), . 121  See ICC Arbitration Rules, art. 11(4) (2012) (‘The decisions of the Court as to the appointment, confirmation, challenge or replacement of an arbitrator shall be final.’); LCIA Arbitration Rules, art. 29.1 (1998) (‘The decisions of the LCIA Court with respect to all matters relating to the arbitration shall be conclusive and binding upon the parties and the Arbitral Tribunal.’); SIAC Arbitration Rules, art. 6.4 (2013) (‘Any decision by the President to appoint an arbitrator under these Rules shall be final and not subject to appeal.’). 122  AT&T Corp. v Saudi Cable Co., [2000] EWCA (Civ) 154, para. 49 (Eng.). See also A v B and X [2011] EWHC (Comm) 2345 (Eng.) (rejecting application under section 24(1)(a) of English Arbitration Act 1996, to remove sole arbitrator in an LCIA arbitration after LCIA denied challenge, but with no discussion in relation to court decision and LCIA decision). 123  AT&T Corp. v Saudi Cable Co., [2000] EWCA (Civ) 154, para. 49 (Eng.) (‘[T]he court, if required to interpret the ICC Rules, would naturally pay the closest attention to any interpretation of the ICC Rules adopted by the ICC Court, but the English courts retain their jurisdiction to determine whether the ICC Rules have been breached when entertaining an application to remove for alleged misconduct.’); UK Departmental Advisory Committee on Arbitration Law (1996), Report on the Arbitration Bill (Feb. 1996), reprinted in 13(3) Arb. Int’l 275, 292 para.107 (1997) (‘it will be a very rare case indeed where the Court will remove an arbitrator notwithstanding that the process has reached a different conclusion’).

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Sources of international arbitrators’ ethical duties A better view is that finality clauses in arbitral rules give institutions the final say on inter- 2.73 pretation and application of their rules.124 Thus, a national court could later evaluate a challenge based on arbitrator conduct under national law in an interlocutory procedure or in annulment proceedings, or under the New York Convention in award enforcement proceedings. In those contexts, however, a national court would not be reviewing the institution’s findings per se, and therefore could not ‘defer’ to the institution’s ruling. It would be separately evaluating under national law or the New York Convention the same facts and circumstances underlying the institution’s ruling. One important consequence of this distinction is that a national court could not find non-compliance with institutional rules if an institution whose rules included a finality clause had already determined that its rules had been complied with. The practical implications of this distinction are potentially significant. For example, an 2.74 institution’s determination that certain information was not required to be disclosed under its rules would preclude a party from later challenging an award under Article V(1)(d) of the New York Convention on the ground that the non-disclosure violated the parties’ agreement. A party could still challenge the award under Article V(1)(b) on the ground that the conflict of interest arising out of the undisclosed information precluded it from presenting its case, or Article V(2)(b) that the undisclosed conflict violated public policy. But in agreeing to arbitral rules that include a finality provision, a party not only agrees to the substantive provisions of those arbitral rules, but also to having their content determined finally and exclusively by the institution. Another perhaps even more important consequence of finality clauses is that they ensure that 2.75 the standards for impartiality articulated in institutional arbitral rules will not be subject to inconsistent interpretation and application by national courts. Direct judicial review of an institution’s decision regarding an arbitrator challenge, regardless of the deference afforded, creates a risk of fragmented interpretation of the institution’s arbitral rules. Consider, for example, the issue in J&P Avax SA v Tecnimont SPA. The ICC Court of Arbitration rejected a challenge to an arbitrator based on an undisclosed conflict on the grounds that it was brought after the 30-day period permitted under the ICC Rules. The judges in the Court of Appeal of Reims nevertheless set aside the award despite the fact that more than 30 days had passed when the challenge was made. The Reims Court of Appeal reasoned that ‘a challenge before the ICC and an application to a judge to set aside the award are separate proceedings, which do not serve the same purpose and are not controlled by the same authority’.125

124  This view is largely consistent with the interpretation given to Article 7(4). See Yves Derains and Eric A. Schwartz, Guide to the ICC Rules of Arbitration, 2nd edn. 139 (Kluwer Law International, 2005) (‘Article 7(4) . . . expressly prohibit[s]‌the communication of the reasons for the Court’s decisions in respect of the specific matters that are the subject of that Article. This is primarily to avoid causing possible embarrassment or offense to the arbitrators concerned and also to circumvent possible ensuing disputes with the parties concerning the Court’s reasons, if they were to be provided, that might also make the Award, when issued, more vulnerable to attack.’). 125  J&P Avax SA v Tecnimont SPA, Cour d’appel [CA] [regional court of appeal] Reims, 2 Nov. 2011, case n° 10/02888 (Fr.) (‘Considérant que la récusation devant l’institution d’arbitrage et le contrôle de la sentence devant le juge de 1’annulation sont des procédures distinctes qui n’ont pas le même objet et ne sont pas soumises à la même autorité.’) (English translation from case report by Georgios Soumalevris, ).

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Arbitrators, Barbers, and Taxidermists 2.76 Consider for a moment if the Reims Court of Appeal had instead decided to review the

ICC Court’s decision, even deferentially, as the London court did in AT&T v Saudi Cable Co. If it engaged in such review, to reach the same result the court could have, for example, interpreted the 30-day period as having an implicit exception for ‘excusable neglect’ or as being wholly inapplicable in cases involving ‘serious conflicts’. While these might be reasonable possible interpretations of the ICC’s 30-day period, they are not the ICC Court of Arbitration’s interpretation of its rules. If national courts adopted this approach, the 30-day period in the ICC Rules could be given different meanings by courts in Paris, Bombay, Sao Paolo, San Francisco, and London.

2.77 A national court decision reinterpreting an institution’s arbitral rules would also effectively

be deciding that the institution had misinterpreted its own rules. That decision would fundamentally undermine the authoritativeness of an institution’s internal decision-making and risk fragmentation of standards in arbitral rules. By contrast, a judicial determination that an institution’s decision was contrary to national law or national interpretation of Convention standards instead recasts the different outcomes as the consequence of different standards being applied by different decision-makers. To be sure, institutions have an interest in minimizing the number of occasions in which national courts reach different outcomes to ensure the efficacy of their decisions. They arguably have an even greater interest, however, in precluding national courts from reinterpreting their rules in a manner inconsistent with other courts and the institution itself.

2.78 In addition to the exclusive opportunity to interpret their own rules, several institutions also

reserve to themselves the right to refuse to appoint an arbitrator that the institution deems is unsuitable, even if the parties have agreed to the appointment.126 This right is another sign that the interests and functions of arbitral institutions are beyond mere facilitation of party preferences. The power to refuse appointment of a mutually agreed-upon arbitrator is a signal of institutions’ regulatory function and ensures that institutions are not obliged to administer arbitrations that are likely to produce unenforceable awards or otherwise lack legitimacy. 2.  Codes of ethics

2.79 Several codes of ethics for arbitrators have been developed by a range of entities. A few codes

have been introduced by certain arbitral institutions, which have appended codes of ethics to their arbitral rules. The most extensive and detailed code promulgated by an institution is the AAA/ABA Code of Ethics, which was originally promulgated in 1977 and extensively reworked in 2004.127 The AAA/ABA Code pertains to both domestic and international arbitrators, and its reworking includes significant changes to bring US practice more in line with international standards.128 126  See, e.g., LCIA Arbitration Rules, art. 7.1 (1998) (treating any agreement to appoint an arbitrator as an agreement to ‘nominate’ an arbitrator and providing that the ‘LCIA Court may refuse to appoint any such nominee if it determines that he is not suitable or independent or impartial’). 127  See AAA/ABA, Code of Ethics for Arbitrators in Commercial Disputes (2004) [AAA/ABA Code), . 128  The AAA recognized that ‘the 1977 Code’s predominant focus on commercial arbitrators in domestic disputes within the United States was no longer useful or realistic’. John D. Feerick, The 1977 Code of Ethics for Arbitrators: An Outside Perspective, 18 Ga. St. U. L. Rev. 907, 919 (2002) (quoting Introduction to Code of Ethics for Arbitrators in Domestic and International Commercial Disputes (Working Draft, 2001)). See also Meyerson and Townsend, ‘Revised Code of Ethics for Commercial Arbitrators Explained’, 11 (2004) (noting

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Sources of international arbitrators’ ethical duties Other institutions have promulgated similar ethical codes, including the Milan Chamber 2.80 of National and International Arbitration,129 the Singapore International Arbitration Centre,130 the Cairo Regional Centre for International Commercial Arbitration,131 the Court of Arbitration at the Polish Chamber of Commerce, the Permanent Court of Arbitration attached to the Chamber of Commerce and Industry of Slovenia, and the Latvian Chamber of Commerce and Industry. Some of these institutions expressly condition appointment of arbitrators on compliance with their codes,132 while others leave compliance as an implicit obligation. Notably, the two most historically important institutions, the ICC and the LCIA, have 2.81 not adopted codes for arbitrators. This omission may signal the relative brand strength in the market of these institutions as compared to newer regional institutions that seek to establish their legitimacy through formal and express guarantees of quality, including with regard to arbitrator conduct in their cases. Still, despite market strength, even the ICC and LCIA have been adopting new rules and procedures to address certain conduct by arbitrators. For example, the new ICC form that arbitrators must complete for appointment requires disclosure of the total number of arbitrations in which the candidate is sitting to ensure that the arbitrator has sufficient time to commit to the new case.133 Reportedly, dereliction or delay by arbitrators may also be redressed by a reduction of fees by the ICC. Whatever internal rules or practices exist, however, most institutions do not generally publi- 2.82 cize any formal sanctions for non-compliance. Apart from informal reports of ICC practices regarding fees, apparently only two institutions publicise sanctions they impose for arbitrator misconduct. The Milan Chamber of National and International Arbitration has a published rule for replacing arbitrators based on violations of its Code of Ethics.134 The other exception is the AAA, which touts a ‘one-strike-you’re-out’ policy. Under this policy, any arbitrator whose award is challenged for improper non-disclosure goes on inactive status and will not

that revisions were designed to take account of changes that had occurred in arbitration practice generally and of ‘the increasing globalization of commercial transactions’). 129  See Milan Chamber of Commerce, International Arbitration Rules: Code of Ethics of Arbitrators (2004), . 130  See Singapore International Arbitration Centre, Code of Ethics for an Arbitrator (2009), . 131  See Cairo Regional Centre for International Commercial Arbitration, Code of Ethics, . 132  See American Arbitration Association, ‘Failure to Disclose May Lead to Removal from the National Roster of Neutrals’, ; Milan Chamber of Commerce, Code of Ethics of Arbitrators, art. 13 (2004), (noting that an arbitrator who does not comply with the Code of Ethics will be replaced and may also be refused participation in future proceedings because of the violation). 133  See Grant Hanessian et al., ‘The Arbitration Review of the Americas 2012: The New ICC and UNCITRAL Rules: Focus on Cost-Effectiveness and Multiparty Disputes’, Global Arb. Rev., (‘In 2009, the ICC Court introduced a procedure under which a potential arbitrator must submit a statement on availability, stating the number of arbitration and court cases in which the potential arbitrator is already involved as party representative, arbitrator or otherwise.’). See also ICC, Arbitration and ADR Rules, art. 11(2) (2012). 134  See Milan Chamber of Commerce, International Arbitration Rules, art. 13.

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Arbitrators, Barbers, and Taxidermists be nominated to future arbitrations while the judicial challenge is pending.135 Even after a final judicial decision, the AAA apparently makes a separate determination of whether the arbitrator should ever be restored to active status on the roster. For those institutions that do not have formal or published enforcement policies, they inevitably take into account perceived ethical transgressions when making future appointment decisions. 2.83 In addition to codes implemented by arbitration institutions, other organizations in the

international arbitration field have promulgated ethical rules for arbitrators. These rules may become applicable to arbitrators if they belong to an organization that has implemented the rules or if the parties contractually incorporate the rules into their arbitral agreement. For example, organizations such as the Chartered Institute of Arbitrators (the CIArb) and the Society of Maritime Arbitrators and US-based Reinsurance and Insurance Arbitration Society (ARIAS-US) each have codes of ethics that apply to arbitrators who are members or, in the case of the CIArb and ARIAS-US, who are certified by them.136 In addition to promulgating codes, these organizations also train members, set admission requirements, and condition membership on adherence to their rules of ethics.

2.84 In a similar vein, the International Bar Association (IBA) has also published the IBA Rules

of Ethics for International Arbitrators (the IBA Rules of Ethics)137 and later the 2004 IBA Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines).138 Despite its name, the IBA does not license attorneys or arbitrators. As a result, these rules and guidelines are not formally applicable to arbitrators or in arbitral proceedings unless they are incorporated into the parties’ arbitration agreements.139

2.85 There are a few important features that the IBA Guidelines and the AAA/ABA Code have in

common and that set them apart from the other arbitral institutions’ codes discussed previously. On the substance, both sources impose on arbitrators a duty to investigate potential conflicts before making required disclosures.140 Another feature is that most other national and international sources focus on articulating qualitative standards to define the nature of impartiality. The AAA/ABA Code and the IBA Guidelines seek to delineate quantitative categories of information to determine the meaning of standards of ‘impartiality.’ The

  See American Arbitration Association, ‘Failure to Disclose’.   The CIArb has also developed a set of guidelines regarding the types of questions and conditions that are appropriate for pre-appointment interviews or ‘beauty pageants’. CIArb, Practice Direction 16: The Interviewing of Prospective Arbitrators, . 137  IBA, Rules of Ethics for International Arbitrators, . 138  IBA Guidelines on Conflicts of Interest in International Arbitration (22 May 2004) [IBA Guidelines], . 139  See, e.g., Hans Smit, ‘A-National Arbitration’, 63 Tul. L. Rev. 629, 631 (1989) (proposing language by which ethical codes can be incorporated into the arbitration agreement via reference to some national body of law); Dr Iur. Oliver Dillenz, Drafting International Commercial Arbitration Clauses, 21 Suffolk Transnat’l L. Rev. 221, 235 n. 71 (1998) (proposing contract language for parties to incorporate the International Bar Association, Rules of Ethics for International Arbitrators, in their agreements). 140  See AAA/ABA Code, Canon II(B) (arbitrators have an ongoing duty to ‘make a reasonable effort to inform themselves of any interests or relationships subject to disclosure’); IBA Guidelines, General Standard 7(c) (‘An arbitrator is under a duty to make reasonable enquiries to investigate any potential conflicts of interest, as well as any facts or circumstances that may cause his or her impartiality or independence to be questioned.’). 135 136

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Sources of international arbitrators’ ethical duties significance of identifying categories of information for disclosure, rather than relying on qualitative standards, will be discussed later in Chapters 6 and 8. In the meantime, it is worth noting that these unique features of the ABA/AAA Code and the IBA Guidelines were promulgated as a result of committee drafting and vetting through international bodies that are dedicated to guiding legal professionals in their professional conduct as arbitrators.141 When the IBA Guidelines first came out, they were decried by many as misguided and overly 2.86 burdensome.142 The outcry has largely (though not entirely) died down, even if there is still interest in revising the IBA Guidelines.143 The reasons why, despite initial scepticism, the Guidelines have commanded such respect will be discussed in more detail later in Chapter 6. The important point for the present discussion is that the IBA Guidelines are now a go-to resource for arbitrators considering whether to make a disclosure or rule on a disqualification, for counsel and parties assessing whether to pursue a particular challenge, and slowly but increasingly for courts ruling on challenges to arbitrators and awards.144 141   Despite its name, the IBA is a federation of national bar associations and law societies, not a licensing body that could impose any penalties for non-compliance. Nevertheless, unlike trade associations, the IBA regards itself as the ‘global voice of the legal profession’ and regards ‘shap[ing] the future of the legal profession throughout the world’ as part of its mission. See . The ABA/AAA project, meanwhile, was initiated and subject to approval by the ABA, and benefitted from input from the CPR Institute for Dispute Resolution, the College of Commercial Arbitrators, and the National Arbitration Forum. See Meyerson and Townsend, ‘Revised Code of Ethics for Commercial Arbitrators Explained’, 11. 142   See, e.g., Ramon Mullerat OBE, ‘Arbitrators’ Conflicts of Interest Revisited: A Contribution to the Revision of the Excellent IBA Guidelines on Conflicts of Interest in International Arbitration’, 4(1) Disp. Res. Int’l 55 (2010) (criticizing that the Guidelines need to be restructured and are too favourable to arbitrators); Nathalie Voser, IBA Guidelines on Conflicts of Interest. How they have been received, AIJA Conference, Moscow, 27 June 2008; Markham Ball, ‘Probity Deconstructed: How Helpful, Really, Are the New International Bar Association Guidelines on Conflicts of Interest in International Arbitration?’ 21 Arb. Int’l 323, 340–1 (2005) (commenting that the Guidelines ‘succeed only somewhat’ in bringing certainty and uniformity to the treatment of arbitrator conflicts of interest); Laurence Shore and Emmanuelle Cabrol, ‘A Comment on the IBA Guidelines on Conflicts of Interest: The Fragile Balance Between Principles and Illustrations, and the Mystery of the “Subjective Test”’, 15 Am. Rev. Int’l Arb. 599, 606 (2004) (cautioning that the Guidelines’ principles and illustrations are ‘too unwieldy to foster uniformity’ and overly ‘complex’). 143   See Ramon Mullerat OBE, ‘Arbitrators’ Conflicts of Interest Revisited: A Contribution to the Revision of the Excellent IBA Guidelines on Conflicts of Interest in International Arbitration’, 4(1) Disp. Resol. Int’l 55 (2010). Calls for revision are actually consistent with views of drafters of the IBA Guidelines, who, in the Guidelines Introduction, call the Guidelines ‘a beginning, rather than an end, of the process’ of defining standards of conduct. See IBA Guidelines, intro. 144  See, e.g., The IBA Conflicts of Interest Subcommittee, ‘The IBA Guidelines on Conflicts of Interest in International Arbitration: The First Five Years 2004–2009’, 4 Disp. Res. Int’l 5 (2010) (citing examples of court decisions citing the IBA Guidelines, including: Vienna Commercial Court, 24 July 2007, Case 16 No. 2/07w (Austria) (unpublished) (Situation 3.1.3 of the Orange List); République de Pologne v Eureko BV, Brussels Court of Appeal, Case No. R G 2007/AR/70 (29 Oct. 2007), 26 ASA Bull 565 (2008) (Belg.); ASM Shipping Ltd of India v TTMI Ltd of England, [2005] APP.L.R. 10/19 (comm.) (19 Oct. 2005) (UK); OLG Frankfurt 26 Civil Division, 4 Oct. 2007, Case No. 26 Sch 8/07 (Ger.) (Situation 3.5.2 of the Orange List); Anders Jilkén v Ericsson AB, Nyutt Juridiskt Arkiv [NJA] [Supreme Court] 2007-11-19 T2448-06, 5 Stockholm Int’l Arb. Rev. 167 (2007) (Swed.); Korsnäs Aktiebolag v AB, Fortum Värme samägt med Stockholms stad, [Svea Ct. of App.] 2008-12-10 (unpublished) (Swed.) (reported in Karl-Erik Danielsson and Björn Tude, ‘Sweden: Two different arbitration cases—The role of the IBA Guidelines on conflicts of interest in international arbitration in Sweden’, Int’l Fin. L. Rev., Apr. 1, 2009, ); Bundesgricht [BGer] [Federal Supreme Court] 20 Mar. 2008, Case No. 4A_506/2007, 26 ASA Bull 565, 575 (2008) (Switz.) (Situation 4.4.1 Green List); Applied Indus. Materials Corp. v Ovalar Makine Ticaret Ve Sanayi, A S, 492 F.3d 132 (2d Cir. 2007) (US) (refusing to apply IBA Guidelines); New Regency Prods. v Nippon Herald Films, 501 F.3d 1101, 1110 (9th Cir. 2007) (stating that the IBA Guidelines ‘are not binding authority and do not have the force of law’ but reinforce a prior holding that ‘a reasonable impression of partiality can form when an actual conflict of interest exists and the lawyer has constructive knowledge of it’)).

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Arbitrators, Barbers, and Taxidermists 2.87 Perhaps the best measure of the Guidelines’ success is that even arbitral institutions that

originally disclaimed any reliance on the IBA Guidelines now admittedly consult them as a meaningful touchstone in ruling on challenges.145 National court reliance on the IBA Guidelines is arguably more limited, mainly because courts have struggled to accord party agreement about ethical standards with existing standards under national statutes and the New York Convention.146 The relationship between consent, ethical rules, and statutory and Convention standards regarding arbitrator conduct is taken up later in Chapter 9. In the meantime, it is helpful to contrast the various sources and procedures described earlier, developed and implemented by international institutions and organizations, with efforts to regulate arbitrators through national sources and institutions. 3.  National law and national courts

2.88 National arbitration laws also contribute to defining the ethical obligations of international

arbitrators, and national courts rule on interlocutory challenges to arbitrators or challenges to awards based on alleged misconduct of arbitrators. Although they provide an essential safety net, there are also problems with national laws and national courts applying their own standards. Independent evaluation under national standards does not necessarily bring greater clarity to questions of what constitutes appropriate arbitrator conduct; instead it contributes to what has been called a ‘global judicial cacophony’ on these issues.147

2.89 While not addressed in detail here, national laws and court decisions employ a range of tests

and analytical frameworks for evaluating alleged arbitrator misconduct and resulting awards. In applying these standards, national courts have been developing an increasingly detailed jurisprudence in an attempt to clarify arbitrator obligations, most specifically with regard to the nature of impartiality and/or independence, and the level of proof required to establish a violation. 4.  International conventions

2.90 The New York Convention has no express provisions directly addressing arbitrators’ obliga-

tions. In the absence of any express provisions, parties seeking to challenge an award based on alleged arbitrator misconduct must argue that the conduct at issue implicitly violates one of the exceptions for enforcement of an award. The two provisions most often invoked are that alleged arbitrator partiality or non-disclosure has meant that the tribunal was not constituted in accordance with the parties’ agreement or, failing agreement, the law of the arbitral seat (Article V(1)(d)), or that it violated the public policy of the enforcement jurisdiction (Article V(2)(b)). A party could also argue that an arbitrator’s alleged partiality prevented it from presenting its case (Article V(1)(b)), and certain types of alleged abuses may also be framed as outside the scope of an arbitrator’s power (Article V(1)(c)). The most common ground, however, is that the alleged arbitrator misconduct violates the public policy of the enforcement jurisdiction.

145  See IBA Conflicts of Interest Subcommittee (illustrating numerous instances where the ICC, LCIA, Stockholm Chambers of Commerce, Swiss Chambers of Commerce, Japanese Commercial Arbitration Association, Chamber of Arbitration of Milan, ICSID, and Permanent Court of Arbitration have cited the IBA Guidelines in their rulings). 146  See, e.g., ANR Coal Co. v Cogentrix of N.C., 173 F.3d 493 (4th Cir. 1999); Delta Mine Holding Co. v AFC Coal Properties, 280 F.3d 815 (8th Cir. 2001). Other cases have held that the parties’ adoption of ethical rules is relevant to judicial analysis of allegations of bias. See, e.g., Sphere Drake Ins. v All American Life Ins., 307 F.3d 617 (7th Cir. 2002). 147  See Conference Report, IBA Annual Conference 2010, Vancouver, ‘The Arbitral Tribunal: Revisiting Established Practices’, 16 No. 1 IBA Arb. News 28, 29 (2011) (comments by Constantine Partasides).

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Sources of international arbitrators’ ethical duties Theoretically, what constitutes a violation of public policy or the Convention’s procedural safe- 2.91 guards and what constitutes a violation of national arbitration law standards for impartiality are not coterminous. In practice, however, courts interpreting the New York Convention’s public policy exception often look to definitions of impartiality and independence in the domestic arbitration laws as previously described. As a result, even under the Convention, nationally defined notions of impartiality may be applied. 5.  National bar associations External to the international arbitration system and the rules that ordinarily govern its 2.92 procedures and participants, a small but apparently growing number of national bar associations are seeking to impose ethical obligations on attorneys who are licensed by them and act as arbitrators. For example, Article 55 of the Italian Codice Deontologico Forense specifically requires, among other things, that Italian lawyers who serve as arbitrators remain independent, disclose certain information about relevant contacts, and preserve the trust parties have placed in them.148 These obligations sound rather generic and are framed in terminology that is similar if not the same as that used in other international sources. These generic terms, however, will be given specific content when Italian courts and authorities interpret and apply them in specific cases. When these terms are interpreted by national authorities, it is unlikely that those interpretations will necessarily match up precisely with meanings ascribed to other national or international standards. Similarly, in the United States, there is a proposed Model Rule for Lawyers Acting as Third 2.93 Party Neutrals.149 It has not been adopted by bar associations, but apparently has some support. By way of example of how the proposed Model Rule might expand disclosure or disqualification standards for arbitrators, under the Rule, any existing or past financial, business, professional, family or social relationship with any of the parties, including, but not limited to, any prior representation of any of the parties, their counsel and witnesses, or service as an ADR neutral for any of the parties’ and analysis of these disclosure obligations ‘extend[s]‌to those of the lawyer, members of his or her immediate family, his or her current employer, partners or business associates.150

These standards, if adopted, would expand considerably disclosure obligations beyond what is currently required under the IBA Guidelines on Conflicts, and the national law of most other jurisdictions. The difference between these national bar rules and the AAA/ABA Code of Ethics is that 2.94 the latter was developed by a bar association, in conjunction with several arbitration institutions and organizations, and was specifically for the regulation of arbitrators as arbitrators. The former bar rules are an effort by bar authorities to apply lawyer regulation frameworks to arbitrators who also happen to be lawyers. Bar authorities do not presume to apply their rules and disciplinary regime when an attorney they have licensed is serving, for example, as   Ministry of Justice National Council of Forensics, Codice Deontologico Forense, art. 55 (2011) (It.).   If adopted, the rule would be incorporated into the Model Rules of Professional Conduct. See CPRGeorgetown Commission on Ethics and Standards of Practice in ADR, Model Rule for the Lawyer as ThirdParty Neutral (2002), . Even if adopted in the Model Rules, such a rule would not become binding on attorneys unless and until the Model Rule were adopted by individual state bar associations. 150  Proposed Rule 4.5.3(b) and (c), . 148 149

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Arbitrators, Barbers, and Taxidermists an umpire in a children’s Little League baseball game or youth football game.151 Those bar authorities seem similarly out of their league, so to speak, in extending their disciplinary authority to an attorney’s service as an arbitrator on the premise that serving as an arbitrator is simply another category of legal services. 2.95 National bar authorities may be justified, and have an important function, in extending their

regulatory reach to domestic arbitrators. If national bar authorities systematically reach out to regulate international arbitrators, however, the consequences are quite different. Nationally developed ethical standards that apply directly to international arbitrators through bar authorities risk fragmenting at the national level the meaning of international obligations, such as impartiality. Fragmentation of arbitrators’ individual professional obligations is different, and potentially much more problematic, than fragmented national law standards for challenging arbitrators or awards. National laws pertaining to arbitrator challenges and awards are applied through the framework of the Convention, either by courts in the legal seat or jurisdictions in which recognition and enforcement is sought. National standards for arbitrators’ professional obligations developed by bar authorities, meanwhile, would be applied by bar authorities or courts in the jurisdictions where arbitrators are licensed (assuming they are licensed attorneys). The result would be that individual arbitrators on the same tribunal could be subject to different ethical obligations. These obligations could, in turn, be different from the standards applied by courts in the seat or enforcement jurisdictions in ruling on challenges during arbitral proceedings or to the award based on the same alleged misconduct by the same arbitrator. 6.  Liability standards

2.96 Another important difference between regulation of arbitrator conduct and attorney con-

duct is professional liability or malpractice liability. Although malpractice claims are most often referenced as a form of liability, as explored in greater detail in Chapter 6, they effectively function as a form of professional regulation. ‘Liability controls,’ to borrow Professor David Wilkins’ term, operate much the same as formal professional discipline in that they are based on ex post complaints by injured parties.152 The main difference is that malpractice claims or ‘liability controls’ provide compensation to the injured party but do not in themselves affect a lawyer’s right to practice law.

2.97 With arbitrators, malpractice as a form of regulation is generally off the table. ‘Most national

arbitration regimes provide arbitrators with statutory or common law immunities from civil claims against them based on the performance of their adjudicative functions.’153 Jurisdictions also vary as to whether the immunity is absolute or qualified.154 At the international level,

151  Professional discipline can be triggered by criminal misconduct by an attorney, but even then only certain types of criminal conduct are treated as ‘professional misconduct’. See, e.g., Model Rules of Prof ’l Conduct, R. 8.4(b), (c) (2009) (defining as misconduct commission of ‘a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects’ and engaging in ‘conduct involving dishonesty, fraud, deceit or misrepresentation’). There can be difficult questions, however, about ‘Where does “bad lawyering” end and “criminal lawyering” begin?’ See Bruce A. Green, ‘The Criminal Regulation of Lawyers’, 67 Fordham L. Rev. 327 (1998) (analysing criminal prosecutions of lawyers). See also Charles W. Wolfram, ‘Lawyer Crimes: Beyond the Law?’ 36 Val. U. L. Rev. 73 (2001) (same). 152  See David B. Wilkins, ‘Who Should Regulate Lawyers?’, 105 Harv. L. Rev. 799, 830–3 (1992). 153 Born, International Commercial Arbitration 2080. 154  See Susan D. Franck, ‘The Liability of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity’, 20 N.Y.L. Sch. J. Int’l & Comp. L. 1 (2000).

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Sources of international arbitrators’ ethical duties the IBA Code of Ethics provides in its introduction that ‘international arbitrators should in principle be granted immunity from suit under national laws, except in extreme cases of willful or reckless disregard of their legal obligations.’ Most arbitral rules also affirm, and thereby create a contractual basis for, arbitrator immunity.155 The International Centre for Settlement of Investment Disputes (ICSID) Convention goes even further than most arbitral rules, providing a more absolute form of immunity that insulates arbitrators from any national court jurisdiction.156 Under these various provisions, arbitrators can only be held liable in narrow situations that 2.98 touch on the most extreme forms of professional malfeasance. Accordingly, they generally cannot be held liable for failure to disclose a conflict of interest, even if that failure ultimately results in the vacatur or non-enforceability of the final award.157 Some other categories of misconduct, such as failure to render a timely award or to render any award,158 or bad faith acts, fraud or gross negligence, might be actionable.159 In sum, there is a general presumption that arbitrators are entitled to immunity for their professional decisions.160 There are solid reasons for this immunity. Immunity avoids the risk that claims against 2.99 the arbitrator may be used as a substitute for a substantive appeal of the award by disgruntled losing parties. Relatedly, immunity also insulates arbitrators from undue pressures that might press them into making rulings to avoid potential liability. The effect of these protections against liability is that only rare examples of arbitrator misconduct are actionable.161

155   See AAA/ABA Arbitration Rules, art. 35 (2010) (Arbitrators will not be liable ‘for any act or omission in connection with any arbitration conducted under these Rules, except that they may be liable for the consequences of conscious and deliberate wrongdoing’.); LCIA Arbitration Rules, art. 31.1 (1998). (No arbitrator shall be liable to any party whatsoever for any act or omission in connection with any arbitration conducted under its auspices, except for ‘conscious or deliberate wrongdoing’.) Finally, the International Chamber of Commerce (ICC) goes further, providing that arbitrators will not ‘be liable to any person for any act or omission in connection with the arbitration’. ICC Rules of Arbitration, art. 34 (1998). The Netherlands Arbitration Institute (NAI) also provides broad immunity. See NAI Arbitration Rules, art. 66 (2010). 156   ICSID Convention on the Settlement of Disputes between States and Nationals of Other States, art. 21(a) (1965) (ICSID Convention) (Arbitrators possess ‘immunity from legal process with respect to acts performed by them in the exercise of their functions‌’). 157  This is true in the United States. See, e.g., Blue Cross Blue Shield v Juneau, 114 S.W.3d 126, 132 (Tex. App. 2003); L8H Airco, Inc. v Rapistan Corp., 446 N.W.2d 372 (Minn. 1989). In non-US jurisdictions, the rules differ. Jenny Brown, ‘The Expansion of Arbitral Immunity: Is Absolute Immunity A Foregone Conclusion?’ J. Disp. Resol. 225, 231 (2009); Anastasia Tsakatoura, ‘Arbitration: The Immunity of Arbitrators’, Lex E-Scripta Online Legal J. (20 June 2002), . 158  See, e.g., E.C. Ernst, Inc. v Manhattan Constr. Comp., 551 F.2d at 1033 (5th Cir. 1977) (‘[T]‌he arbitrator has a duty . . . to make reasonably expeditious decisions’ and when an arbitrator fails to render a timely decision ‘he loses his claim to immunity because he loses his resemblance to a judge’ and ‘has simply defaulted on a contractual duty to both parties’); Morgan Phillips, Inc., v JAMS/Endispute, 140 Cal. App. 4th 795, 802 (Ct. App. 2006) (noting that under California law, arbitral immunity does not apply when an arbitrator refuses to issue an award because that failure is as a breach of contract that is not ‘integral to the arbitration process [but] rather, a breakdown of that process’); Sara Roitman, ‘Beyond Reproach: Has the Doctrine of Arbitral Immunity Been Extended Too Far for Arbitration Sponsoring Firms?’ 51 B.C. L. Rev. 557, 579–81 (2010). 159  See note 168. 160  See Franck, ‘The Liability of International Arbitrators’ (providing a detailed analysis of arbitrator immunity and its relationship to the contractarian and judicial models of arbitration in various countries). 161 Maureen A. Weston, ‘Reexamining Arbitral Immunity in an Age of Mandatory and Professional Arbitration’, 88 Minn. L. Rev. 449, 517 (2004) (suggesting that ‘arbitral immunity should be qualified, not absolute’ for professional arbitrators and provider institutions).

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Arbitrators, Barbers, and Taxidermists 2.100 Despite the general consensus that arbitral immunity is a necessary protection for arbitral

decision-making, a growing number of commentators have challenged this view. Many of these commentators consider themselves very ‘arbitration friendly,’ and some even serve as arbitrators. They argue, however, that liability for arbitrators could ‘harness market forces to produce good results in arbitration.’162 They also argue that there is little justification for treating arbitrators differently from other professions, such as doctors, lawyers, or accountants, or other service providers such as exterminators, taxidermists, or hairdressers. These arguments raise implicit questions about the nature of international arbitrators’ role, and whether they are simply providers of contractual services, or something more, a topic taken up in Chapter 9.

C.  International arbitrators’ substantive ethical obligations 2.101 Despite the range of sources and the variations in their application, there is surprisingly

broad agreement about the general substance of arbitrators’ ethical obligations, at least at the most abstract levels. Arbitrators’ principal ethical obligation is to be, and to behave, impartially and/or independently. While impartiality is the most fundamental of arbitrators’ obligations, it is also the one that is most complex and hence subject to the most intense discussion and confusion. Chapter 8 provides a nuanced examination of what these obligations really mean. The remainder of this chapter provides a general overview of its basic tenets, as well as arbitrators’ other ethical obligations, including the obligation to conduct hearings fairly, to act competently, to refrain from inappropriate ex parte contacts, to maintain the confidentiality of the proceedings, and to render an award in a timely fashion. 1.  The obligation of impartiality and independence

2.102 The obligation of arbitrators to be impartial or independent is both obvious and imperative.

Arbitrators, after all, take the place of judges and the act of adjudicating necessarily requires a neutral third-party decision-maker. But the nature of impartiality is not nearly as simple as definitions might suggest, particularly when it intertwines with notions of party preference and party autonomy, a topic taken up later in Chapter 8.

162  Peter B. Rutledge, ‘Market Solutions To Market Problems: Re-Examining Arbitral Immunity as a Solution to Unfairness in Securities Arbitration’, 26 Pace L. Rev. 113, 121 (2005) (‘I propose that we strip arbitrators and arbitral institutions of this immunity.’). See also Peter B. Rutledge, ‘Toward a Contractual Approach for Arbitral Immunity’, 39 Ga. L. Rev. 151, 154 (2004) (‘Why should arbitrators and arbitral institutions enjoy such broad immunity as a matter of law at all?’); Maureen A. Weston, ‘Reexamining Arbitral Immunity in an Age of Mandatory and Professional Arbitration’, 88 Minn. L. Rev. 449, 517 (2004) (‘Because of important differences between judges and arbitrators, arbitral immunity should be qualified, not absolute, and limited to protecting the arbitral decision-making process from reprisals by parties dissatisfied with the outcome.’); Susan Franck, ‘The Liability of International Arbitrators’ 3 (Broad arbitrator immunity ‘should . . . be qualified by statute in certain, limited circumstances where arbitrators (1) act with intentional, bad-faith conduct, or (2) unjustifiably abandon their arbitral mandate and fail to render an award’.); Andrew Guzman, ‘Arbitrator’s Liability: Reconciling Arbitration and Mandatory Rules’, 49 Duke L.J. 1279, 1279 (2000) (proposing a method of arbitrator liability allowing ‘the losing party in an arbitration to sue the arbitrator on the ground that a mandatory rule was ignored’). But see Born, International Commercial Arbitration 2019 (‘Qualified arbitrator immunity is appropriate and entirely necessary . . . [A]‌rbitrators fulfill adjudicative functions and should, in principle, be entitled to the same types of immunity as state court judges.’).

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International arbitrators’ substantive ethical obligations a.  ‘Independence’ versus ‘impartiality’ versus ‘neutrality’ One complication in understanding arbitrator ethics is terminological. Some sources, such 2.103 as the 1996 English Arbitration Act, refer to an arbitrator’s duty to be ‘impartial’. The ICC Arbitration Rules and the Swiss Law on Private International Law, on the other hand, refer to ‘independence’, while others, such as the UNCITRAL Model Law, frame their standard in terms of both ‘independence’ and ‘impartiality’. Still other sources refer to an obligation of arbitrators to be ‘neutral’.163 Many commentators have sought to parse the meaning of and distinctions among these terms.164 To the extent some logical or linguistic distinction can be made, however, in practical terms it appears to be largely a distinction without a difference. These terms are used more or less interchangeably by institutions and courts, and their true meaning is determined more in their application than in their phraseology. Obligations of impartiality and/or independence are often embedded in broader standards, 2.104 which determine how to establish and evaluate allegations of bias in the context of arbitral proceedings. These tests are also variegated and apply at different stages and in different contexts. The UNCITRAL Model Law, which has been adopted by over 60 jurisdictions and has influenced the national legislation of many others, provides that arbitrators can be challenged if there are circumstances that give rise to ‘justifiable doubts’ about their impartiality or independence. Meanwhile, Section 10(a)(2) of the US Federal Arbitration Act permits challenge to an award when ‘there was evident partiality or corruption in the arbitrators, or either of them’. In England, recent case law has established that removal of an arbitrator requires a showing of a ‘real danger of bias’.165 Even with this variation, these standards share a few common elements. First, they do not 2.105 generally require proof of actual bias, partiality, or lack of independence by an arbitrator, but instead require some showing of risk, potential, or appearance of bias. There are two reasons for this lower threshold of proof. On the one hand, because actual bias is a mental state, it is exceptionally difficult to prove, particularly with the limited types of circumstantial evidence that are usually available.166 More importantly, however, parties’ satisfaction with and confidence in the arbitration process may be adversely affected by behaviour that seems to indicate bias, or creates a real risk of bias, regardless of the arbitrator’s actual underlying mental state. Another feature that these standards have in common is that their perimeters are not self- 2.106 evident. Instead, the requirements of each has been fleshed out or elaborated through interpretation by national courts, though they have not always done so with the greatest clarity. For example, in the United States, there is a split among the various federal appellate courts about what the ‘evident partiality’ test means. The US Supreme Court has not addressed the issue since the 1960s in a confused and confusing decision.167 Some lower US courts have 163  See Carrie Menkel-Meadow, ‘Ethics Issues in Arbitration and Related Dispute Resolution Processes: What’s Happening and What’s Not’, 56 U. Miami L. Rev. 949–951 (2002); James H. Carter, ‘Improving Life with the Party-Appointed Arbitrator: Clearer Conduct Guidelines for “Nonneutrals”’, 11 Am. Rev. Int’l Arb. 295, 298–99 (2000). 164  See, e.g., David Caron, et al., The UNCITRAL Arbitration Rules: A Commentary (2006) 215. Generally speaking, ‘independence’ is said to concern the external connections or relations of an arbitrator, while ‘impartiality’ is said to concern his or her subjective state of mind. 165  AT&T Corporation v Saudi Cable Co., 2 Lloyd’s Rep. 201, ADD (Ct. App. 2000). 166  As one court reasoned, ‘Unless an arbitrator publicly announces his partiality, or is overheard in a moment of private admission, it is difficult to imagine how “proof ” [of bias] would be obtained’. Morelite Construction Corp. v N.Y.C. District Council Carpenters’ Benefit Funds, 748 F.2d 79 (2d Cir. 1984). 167  Commonwealth Coatings v Continental Casualty, 393 U.S. 145 (1968).

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Arbitrators, Barbers, and Taxidermists interpreted Section 10(a)(2) as being satisfied when there is a ‘mere appearance of bias’,168 while courts have required clear proof of ‘so intimate [a relationship] as to cast serious doubt on the arbitrator’s impartiality’.169 Meanwhile, still other courts have staked out something of a middle ground, holding that the test is satisfied with proof such that ‘a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration’.170 2.107 In interpreting the ‘justifiable doubts’ standard, courts in jurisdictions that have adopted the

Model Law have also offered varied tests, but most courts and commentators agree that it is an objective test that requires something more than a mere appearance of partiality.171 While these various judicial elaborations and interpretations provide some additional guidance, the real meaning of these judicial interpretations derives from application on a case-by-case basis. When these cases are aggregated, some discernible categories have emerged, though often even seemingly clear categories are subject to exceptions in particular factual contexts. These categories include some obvious types of misconduct, like direct financial stakes and business dealings with one of the parties, although even here the category is not absolute since minor shareholdings in one of the parties generally does not constitute proof of unacceptable bias.172 On the other hand, aggressive questioning of a witness or expressions of opinion during proceedings are generally not considered sufficient to support a challenge, but on occasion have contributed to findings of partiality.173

b.  The duty to disclose 2.108 As already examined, the obligation of impartiality is the duty to disclose. Today, virtually all ethical codes, national laws, and arbitral rules impose on arbitrators an obligation to disclose information as part of the arbitrator appointment process. The purpose of this obligation is twofold. At a practical level, they assure that parties and administering institutions have information that might be the basis for challenging or evaluating challenges regarding the ability of an arbitrator to serve. At a more general level, disclosures promote transparency and confidence in the process by ensuring that every participant in the process (the arbitrators, attorneys, parties, and arbitral institution, if any) is aware of contacts, experiences, and relationships that may materially affect the actual or perceived decision-making impartiality of the arbitrator. At a more practical level, disclosure facilitates parties’ ability to challenge arbitrators. 2.109 Some sources mistakenly treat disclosure standards and disqualification standards as syn-

onymous, but their distinct purposes reveal the better view. In contrast to the purposes of disclosure described earlier, the purpose of disqualification is to remove an arbitrator who is not sufficiently impartial to serve. Given the broader purposes of the duty to disclose, it follows that the body of information that must be disclosed should be understood as broader than the information that can constitute a basis for disqualification of an arbitrator. In other   Kern v 303 East 57th Street Corp., 204 A.D.2d 152, 153 (N.Y. App. Div. 1994).   Merit Ins. Co. v Leatherby Ins. Co., 714 F.2d 673 (5th Cir. 1983) (Posner, J.). 170  Morelite Construction Corp. v N.Y.C. District Council Carpenters’ Benefit Funds, 748 F.2d 79 (2d Cir. 1984). 171  See Born, International Commercial Arbitration 1822. 172  See AT&T Corporation v Saudi Cable Co., 2 Lloyd’s Rep. 127 (Ct. App. 2000). 173  Compare In Matter of Arbitration between Cole Publ’g Co., Inc. v John Wiley & Sons, Inc., 1994 WL 532898, *2 (S.D.N.Y. 29 Sept. 1994) (rejecting challenge to arbitral award that alleged arbitrator bias was evidenced by aggressive questioning of some witnesses and attempts to rehabilitate others, and that arbitrator acted more as an advocate than an impartial moderator); with Holodnak v Avco Corp., 381 F. Supp. 191 (D. Conn. 1974), aff’d in part, rev’d in part on other grounds, 514 F.2d 285 (2d Cir. 1975) (finding bias and vacating arbitral award based on arbitrator’s ‘badgering’ the complaining party at the time of the proceedings). 168 169

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International arbitrators’ substantive ethical obligations words, not every disclosure that is made should necessarily result in a disqualification, while the fact that information would not be sufficient to disqualify an arbitrator does not suggest that it need not be disclosed. This distinction is reflected in the UNCITRAL Model Law, which requires in Article 2.110 12(1) disclosure of facts that are ‘likely to give rise to justifiable doubts’ as to the arbitrator’s impartiality or independence, but provides in Article 12(2) for disqualification only when circumstances ‘give rise to justifiable doubts’ about an arbitrator’s impartiality and independence. A broad, cautious approach to disclosure also has the benefit of reducing reactions to information that seems benign if disclosed in a timely manner, but can raise suspicions if inadvertently discovered later (particularly after an adverse decision by the tribunal). Notably, under some authorities, a failure to disclose information can in itself be evidence 2.111 of partiality or improper intent. For example, Article 4.1 of the IBA Rules of Ethics state that ‘Failure to make such [a required] disclosure creates an appearance of bias, and may of itself be a ground for disqualification even though the non-disclosed facts or circumstances would not of themselves justify disqualification’. Some national courts have also reasoned that a non-disclosure ‘is itself an act suggestive of bias’,174 while other courts have refused to consider the act of non-disclosure independently from the content of the underlying information. With regard to their substance, over the years disclosure obligations have evolved sig- 2.112 nificantly. As previously noted, the 1975 ICC Arbitration Rules required only that arbitrators disclose circumstances that, ‘in their opinion’, might call into question their independence ‘in the eyes of the parties’.175 Over the years, the subjective judgment of arbitrators about what to disclose gave way to the objective standards that now prevail in most arbitral rules and national laws.176 In addition to shifting to an objective standard, also as previously noted, new standards in arbitral rules also now include more expansive disclosure requirements. Even still, however, disclosure obligations articulated using vague terms, like ‘independence’ or ‘impartiality’ are subject to interpretation by arbitrators. As a result, as a practical matter they end up leaving arbitrators considerable room for discretion in deciding what types of information to disclose.177 In the wake of increased challenges and the related need for more specific direction, there 2.113 has been a move from objective but qualitative disclosure and disqualification standards to quantitative, categorical descriptions of the specific content that must be disclosed. For example, instead of simply requiring that arbitrators disclose information that ‘may give rise to justifiable doubts’, the new AAA/ABA Rules and the IBA Guidelines describe specific relationships and circumstances. In formulating these categories, a number of drafts were extensively discussed and commented on, but the IBA Guidelines have still been criticized

  Forest Elec. Corp. v HCB Contractors, 1995 WL 37586 (E.D.Pa. 1995).   W. Lawrence Craig et al., International Chamber of Commerce Arbitration 3rd edn. (2000) § 13.04, 214 and n. 26. 176  See, e.g., ICC Arbitration Rules, art. 7(2). 177  For further discussion on this point, see Catherine A. Rogers, ‘Regulating International Arbitrators: A Functional Approach to Developing Standards of Conduct’, 41 Stan. Int’l L. Rev. 53 (2005) . 174 175

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Arbitrators, Barbers, and Taxidermists on several grounds.178 Whatever else might be said, they offer the distinct advantage of reducing arbitrator discretion in evaluating whether specific information fits within a qualitative disclosure obligation. In this respect, categorical descriptions of specific types of information may reduce the risk that an institution or national court will reach a different conclusion than the arbitrator did during the appointment process about whether a disclosure was necessary. 2.114 Categorical descriptions of information to be disclosed may also reduce an internal con-

flict of interest that prospective arbitrators arguably face when they are deciding whether to disclose information. On the one hand, at least in the short term, candidates may have an interest in securing an appointment, and disclosing a potential conflict might jeopardize that interest. In the longer term, of course, arbitrators have a much greater interest in avoiding challenges. Even in an imperfect marketplace for information, some challenges become highly public and can result in damage to an arbitrator’s reputation. When prospective arbitrators confront situations that are either not addressed by, or are apparently permitted by the various rules, but nevertheless seem capable of raising concerns about impartiality, most sources encourage them to err on the side of disclosing possibly relevant information. c.  The duty to investigate

2.115 Related to the question of disclosure is the question of whether arbitrators have a duty

to investigate potential conflicts of interest as part of their disclosure obligations. Judicial authority, particularly in the United States, is mixed regarding the effect of an arbitrator’s lack of knowledge.179 Some courts have found that an arbitrator cannot be biased if he or she does not know about an alleged conflict, and therefore has no duty to investigate unknown facts,180 while other courts have reasoned that, since the standards for impartiality are framed to also prevent perceptions of bias, potential arbitrators must investigate potential conflicts.181 Notwithstanding judicial uncertainty, as explored in greater detail in Chapter 6, the duty to investigate originated and is firmly established in international arbitral rules and international codes of ethics.

d.  Nationality and other group affiliations 2.116 Nationality and arbitrator impartiality have a somewhat strange relationship. As one commentator has noted, ‘[i]‌t is both the peculiarity and the essence of the arbitration method that allow – in the very same setting – national commonality to perpetuate and nationalistic favoritism to be neutralized’.182 On the one hand, international arbitration exists primarily

178  See, e.g., Markham Ball, ‘Probity Deconstructed: How Helpful, Really, Are the New International Bar Association Guidelines on Conflicts of Interest in International Arbitration?’ 21 Arb. Int’l 323 (2005). 179  Compare Betz v Pankow, 31 Cal. App.4th 1503 (1995) (relying on arbitrator’s lack of knowledge of former firm’s conflict to find no impression of possible bias); Lifecare Int’l Inc. v CD Medical, Inc., 68 F.3d 429 (11th Cir. 1995) (rejecting the notion that arbitrators have a duty to investigate past contacts and defining ‘evident partiality’ to mean that arbitrator had actual knowledge that information was not disclosed); Al-Harbi v Citibank, N.A., 85 F.3d 680, 682 (D.C.Cir. 1996) (finding ‘no source for any such generalized duty’ to investigate) with Wheeler v St. Joseph’s Hospital, 63 Cal.App.3d 345 (1976) (requiring vacation of award notwithstanding fact that arbitrator from reputable firm did not know of conflict). 180  Peoples Sec. Life Ins. Co. v Monumental Life Ins. Co., 991 F.2d 141 (4th Cir. 1993). 181  Schmitz v Zilveti, 20 F.3d 1043 (9th Cir. 1994). An interesting recent US case in this regard is Applied Industrial Materials Corp. v Ovalarmakine Ticaret Ve Sanayi, 492 F.3d 132 (2nd Cir. 2007), which held that an arbitrator may not simply construct a so-called Chinese Wall, but instead is obliged to investigate and disclose information regarding the potential conflict. 182 Ilhyung Lee, ‘Practice and Predicament: Nationalism, Nationality, and National-Affiliation in International Commercial Arbitration’, 31Fordham Int’l L. J. 603 (2007).

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International arbitrators’ substantive ethical obligations to ensure that parties will not be subject to the presumed bias of their opponents’ national courts. On the other hand, parties often nominate arbitrators who share their nationality, on the assumption that common cultural and legal backgrounds will ensure that their perspectives are understood by the tribunal.183 Even if parties can and do choose to nominate party arbitrators who share their nationality, 2.117 however, there is a general presumption against a chairperson or sole arbitrator sharing the nationality of one of the parties (absent contrary agreement). This presumption is reflected in the rules of various institutions, such as Article 9(5) of the ICC Arbitration Rules, which provides that a sole arbitrator or chairperson appointed by the ICC ‘shall be of a nationality other than those of the parties’. Notably, the Rules also provide for an exception ‘in suitable circumstances’ and when neither party objects.184 In investment arbitration, concerns about nationality have led to more restrictive rules and 2.118 practices.185 For example, the ICSID Rules of Procedure for Arbitration Proceedings (the ‘ICSID Rules’) provide that ‘[t]‌he majority of the arbitrators shall be nationals of States other than the Contracting State party to the dispute and the Contracting State whose national is a party to the dispute’. Application of this rule means that in a typical two-party arbitration with a tri-partite panel, all three of the arbitrators must be from States different from those of the parties. The ICSID Rules allow the parties to override this provision by agreement, but some investment arbitration provisions, such as those in the Softwood Lumber Agreement Between the Government of Canada and the Government of the United States of America, expressly disallow any member of the tribunal to be a citizen or resident of the same country as one of the parties.186 In a globalized world, and especially among a group as internationally mobile and cross-cultural 2.119 as international arbitrators, nationality and residency are not always an accurate proxy for cultural or political empathies. Particularly in disputes involving parties from certain regions or nations with historical enmities, ethnic or religious affiliations may be more important than national identity.187 This distinction is acknowledged in the ICC Arbitration Rules, which provide that in addition to nationality, in making confirmations or appointments, the ICC Court will consider not only nationality, but also ‘residence and other relationships with the countries of which the parties or the other arbitrators are nationals’.188 In fact, ICC national committees and other appointing authorities routinely consider such ‘other relationships’ when making appointments involving parties from regions or backgrounds that may trigger sensibilities. 2.  Other ethical obligations While the duty to act impartially is the most frequently discussed ethical obligation of arbi- 2.120 trators, a range of other obligations also apply to them. The remainder of this chapter briefly surveys those obligations. 183  This view was expressed by certain delegates in the drafting of the ICSID Convention. See Christoph Schreuer, The ICSID Convention: A Commentary (2001) 498. 184  ICC Rules of Arbitration, art. 9(5). 185  See Omar E. García-Bolívar, ‘Comparing Arbitrator Standards of Conduct in International Commercial Trade Investment Disputes’, 60-JAN Disp. Resol. J. 76 (2006). 186  Softwood Lumber Agreement Between the Government of Canada and the Government of the United States of America, Article XIV, para 8. 187  See Lee, ‘Practice and Predicament’. 188  ICC Rules, Article 9(1) (emphasis added).

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Arbitrators, Barbers, and Taxidermists a.  Obligation to conduct arbitration in accordance with the arbitration agreement 2.121 International arbitrators have a duty to conduct the arbitral proceedings in accordance with

the parties’ arbitration agreement (and any subsequent procedural agreements between the parties). This obligation is made express in some ethical rules and national laws.189

2.122 For example, Article 18 of the UNCITRAL Model Law provides that ‘the parties shall be

treated with equality and each party shall be given a full opportunity of presenting his case’. In rare instances, arbitrators may disregard the parties’ agreement, either because enforcing it would require a violation of international public policy or otherwise render a resulting award unenforceable in the relevant national courts. The implications of these obligations for the arbitrators’ role is analysed in detail in Chapter 9.

2.123 Arbitrators also have an obligation to complete their mandate (including by not resigning

unjustifiably prior to rendering a final award), by deciding all of the issues presented to them.190 Conversely, arbitrators are obligated to respect the limits of their own jurisdiction and the parties’ agreement.191 Some ethical codes spell out this obligation specifically, though it may be subject to countervailing obligations to observe applicable mandatory law.

b.  Obligations of competence and diligence 2.124 Arbitrators also have general obligations of competence and diligence, which are specified in some ethical rules.192 An arbitrator should not accept an appointment unless actually possessing the requisite skills, such as language, and unless able to accommodate the arbitration in his or her schedule. This obligation of diligence also extends to issuance of the final award. c.  Obligation of confidentiality 2.125 Another obligation that is rarely discussed, but potentially very important to the parties, is

an arbitrator’s obligation to maintain confidentiality. Among the leading arbitration institutions, only a few actually impose a duty on arbitrators to maintain confidentiality.

2.126 Article 46 of the Stockholm Chamber of Commerce Arbitration Rules imposes such an

obligation. Similarly, Article 34 of the AAA/International Centre for Dispute Resolution (ICDR)’s International Arbitration Rules requires arbitrators to maintain the confidentiality of ‘confidential information disclosed during the proceedings by the parties or by witnesses . . .’ and ‘all matters relating to the arbitration or the award’. Article 9 of the IBA Rules of Ethics also requires that arbitrators maintain ‘in perpetuity’ deliberations of the tribunal and the contents of the award, and Canon VI of the AAA/ABA Code of Ethics obliges arbitrators 189  See ABA/AAA Code of Ethics, Canon I(E) (‘where the agreement of the parties set forth procedures to be followed in conducting the arbitration or refers to rules to be followed, it is the obligation of the arbitrator to comply with such procedures or rules. An arbitrator has no ethical obligation to comply with any agreement, procedures or rules that are unlawful or that, in the arbitrator’s judgment would be inconsistent with this Code.’). Most arbitration rules also include provisions that imply such an obligation. For example, Article 15(1) of the ICC Arbitration Rules permits arbitrators to select procedures to apply only in the absence of party agreement on the subject. See also UNCITRAL Model Law, arts. 19(1), 19(2); ICSID Rules, Rule 20(2). 190  See ABA/AAA Code of Ethics, Canon I(H) (‘Once an arbitrator has accepted an appointment, the arbitrator should not withdraw or abandon the appointment unless compelled to do so by unanticipated circumstances that would render it impossible or impracticable to continue.’). See Julian Lew, et al., Comparative International Commercial Arbitration (2003) ¶12–15. 191  Cindy G. Buys, ‘The Arbitrators’ Duty to Respect the Parties’ Choice of Law in Commercial Arbitration’, 79 St. John’s L. Rev. 59 (2005). 192  IBA Rules of Ethics, Introductory Note (‘International arbitrators should be impartial, independent, competent, diligent and discreet.’).

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International arbitrators’ substantive ethical obligations to ‘keep confidential all matters relating to the arbitration proceedings and decision.’ Some national laws also impose obligations to maintain as confidential information they obtain in the performance of their professional duties. In cases when none of these rules directly apply, parties invariably have a sense that arbi- 2.127 trators will not, unless required by law, publicly reveal information about the proceeding or its outcome. Confidentiality may be one area where formal ethical regulation remains underdeveloped, but parties have pronounced and precise expectations. As a result, the personal integrity and ethical discretion of individual arbitrators remains an important source of protection for confidential information. d.  Obligation to propose (or not to propose) settlement There is little consensus with respect to an arbitrator’s obligation to propose settlement or to 2.128 refrain from pressing settlement, and parties from different systems may have significantly different assumptions. On the one hand, in some legal systems, judges are legally required to aid the parties in attempting to reach settlement,193 and international arbitrators are arguably in a unique position to be able to encourage settlement.194 On the other hand, the process of encouraging settlement, particularly to the extent it may involve ex parte communications with parties, may compromise an arbitrator’s obligations of impartiality, which is why some legal traditions and arbitration rules prohibit this intersection of roles.195 Article 8 of the IBA Rules of Ethics permits arbitrators, with the consent of the parties, to assist in settlement efforts, but it also requires that they warn parties about the risks of ex parte settlement communications. To the extent it can be considered an obligation, any duty to promote settlement is best understood as an obligation for arbitrators to propose that, in appropriate circumstances,196 the parties consider settlement.197 e.  Obligations in light of criminal misconduct National laws may also impose certain obligations on arbitrators when they suspect corrup- 2.129 tion or are confronted with criminal wrongdoing by the parties.198 In addition, arbitrators’ other obligations may be excused if performing them would require a violation of national criminal law.199

193  Jun Ge, ‘Mediation, Arbitration and Litigation: Dispute Resolution in the People’s Republic of China’, 15 UCLA Pac. Basin L.J. 122, 127 (1996) (noting that the Chinese Civil Procedure Law requires judges to conduct mediation if the parties do not object). 194  Harold I. Abramson, ‘Protocols for International Arbitrators Who Dare to Settle Cases’, 10 Am. Rev. Int’l Arb. 1, 2 (1999). 195  For example, Rule 1(4) of the ICSID Rules disqualifies anyone who has previously served as a mediator in the same dispute from acting as an arbitrator. 196  Christian Hausmaninger, ‘Rights and Obligations of the Arbitrator with Regard to the Parties and the Arbitral Institution—A Civil Law Viewpoint’, in ICC, The Status of the Arbitrator (ICC Publication No. 564 1995) 45. 197  Michael Collins, ‘Do International Arbitral Tribunals Have Any Obligations to Encourage Settlement of the Disputes Before Them?’ 19 Arb. Int’l 333 (2003). 198  See Alexis Mourre, ‘Arbitration and Criminal Law: Reflections on the Duties of the Arbitrator’, 22 Arb. Int’l 95 (2006). 199  See AAA/ABA Code, Canon I(E) (‘An arbitrator has no ethical obligation to comply with any agreement, procedures or rules that are unlawful or that, in the arbitrator’s judgment, would be inconsistent with this Code.’).

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D. Conclusion 2.130 The sources and content of arbitrators’ ethical obligations is a complex topic. It is also

uniquely interwoven into the procedures and market conditions under which arbitrators are selected and appointed. The highly strategic nature of the selection process, combined with imperfections in the market for arbitrator services present added complications for effectively regulating the professional conduct of arbitrators. Notwithstanding these challenges, the substance and forms of arbitrator regulation are, with some exceptions described in later chapters, generally more effective than might be supposed in the absence of traditional forms of professional regulation.

2.131

In recent years, the range of sources that combine together to determine the ethical obligations of arbitrators has expanded dramatically. Complicating the sheer plethora of sources, these various sources apply at different stages of the arbitral proceedings and are applied by different entities for different purposes. The result is that even a presumptively static obligation, such as impartiality, may appear to shift or alter depending on the stage and context of its application. Chapter 6 examines how these various sources fit together and how the allocation of regulatory authority among them reveals that international arbitrators provide a model for self-regulation that can be emulated to regulate other participants in international arbitration, as discussed in the following chapters.

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3 ATTORNEYS, BARBARIANS, AND GUERRILLAS What they are not familiar with[,]‌people call barbarian. Montaigne The conventional army loses if it does not win. The guerrilla wins if he does not lose. Henry A. Kissinger

The topic of attorney ethics in international arbitration is fraught with uncertainty. As 3.01 described in Chapter 1, in the absence of international standards, most attorneys rely on background assumptions based on their own national standards about what constitutes proper conduct.1 These ethical assumptions are usually based on attorneys’ education, legal training, and professional acculturation and experience.2 The problem in international arbitral proceedings is that what is perfectly acceptable in one system may be regarded—to borrow Montaigne’s term—as ‘barbarian’ by attorneys, parties, or arbitrators from another system. Examples of these cultural conflicts abound. Back when the US practice of cross-exami- 3.02 nation was not commonly accepted in international arbitration, it was called ‘barbaric’, ‘primitive’, and even unethical by Continental practitioners.3 Typical US techniques for 1  Paul A. Crotty and Robert E. Crotty, ‘Ethical Conduct in Arbitration’, in Robert L. Haig (ed.), Business and Commercial Litigation in Federal Courts, Volume Four, 3rd edn. (2011) § 48:57 (‘Counsel are subject to the professional conduct requirements of the courts of the country where they are admitted. Determining whether and to what extent those requirements apply in international arbitration, however, is no easy task. There is no uniform code of ethics for counsel in international arbitration, and counsel from different countries will likely have different ethics practices.’). 2  Philip S.C. Lewis, ‘Comparison and Change in the Study of Legal Professions’, in Richard L. Abel and Philip S.C. Lewis (eds.), Lawyers in Society, Volume Three: Comparative Theories (1989) 27, 32 (‘Every legal system will have theories of the legal profession, which usually can be deduced from their rules governing lawyers or describing proper representation.’); John C. Reitz, ‘Why We Probably Cannot Adopt the German Advantage in Civil Procedure’, 75 Iowa L. Rev. 987, 994 (1990) (‘[T]‌he “dutiful” attorney is obviously a culturally specific standard.’). See also Roger J. Goebel, ‘Professional Qualification and Educational Requirements for Law Practice in a Foreign Country: Bridging the Cultural Gap’, 63 Tul. L. Rev. 443, 520–2 (1989). 3  Yves Dezalay and Bryant Garth, ‘Merchants of Law as Moral Entrepreneurs: Constructing International Justice from the Competition for Transnational Business’, 29 Law & Soc’y Rev. 27, 53 (1995); see also Patrick Thieffry, ‘European Integration in Transnational Litigation’, 13 B.C. Int’l & Comp. L. Rev. 339, 356–7 (1990) (‘US-style procedural rules, the absence of which US litigants tend to criticize in European courts, are precisely those considered to be the most outrageous by European litigants in US courts.’). Arbitrators trained in the civil law tradition are often not familiar with or accustomed to cross-examination techniques and regard such efforts ‘as embarrassing (if not barbaric) for a witness to be subjected to attack at an arbitration hearing’. See Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, 3rd edn. (2004) § 6–115; John

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Attorneys, Barbarians, and Guerrillas ‘preparing’ witnesses are still referred to as ‘daring’ and certain varieties still constitute ‘flagrant misbehaviour’, at least according to some leading Continental arbitrators.4 US-style document production is described as ‘outrageous’,5 and US-style contingency fees as simply ‘bad’.6 American attorneys, meanwhile, grumble about foreign attorneys’ alleged bad faith non-compliance with document requests, improper failure to correct perjurous testimony by witnesses, and a lax attitude toward conflicts of interest. 3.03 In dealing with these various cultural conflicts, modern international arbitration has done a

remarkable job of harmonizing some of the most important procedural differences between national legal traditions.7 There is now general agreement, for example, regarding the availability in international arbitration of cross-examination8 and of some minimal-level document exchange.9 These and other procedural innovations, however, have revealed ethical differences between lawyers from different systems and, in some instances, created new ethical conflicts. International arbitration has been slower and less effective at responding to these ethical conflicts.10

3.04 Some international standards have been developed to redress particular ethical conflicts. For

example, pre-testimonial communication with witnesses is now generally considered acceptable in international arbitration. These efforts have only addressed a few specific issues, and thus are limited in both reach and effect. Moreover, the relationship between these new ethical norms and national ethical rules is not always certain.11 As a result, counsel ethics in international arbitration remains largely an ethical no-man’s land and the ability to enforce supposedly applicable rules remains elusive.

M. Townsend, ‘Clash and Convergence on Ethical Issues in International Arbitration’, 36 U. Miami Inter-Am. L. Rev. 1, 5 (2004) (noting that ‘cross-examination [was] considered unethical . . . [under] the view of some opponents of the practice’‌); Pierre Karrer, ‘The Civil and Common Law Divide: An International Arbitrator Tells It Like He Sees It’, 63 Disp. Resol. J. 72, 77 (2008). 4   See Hans Van Houtte, ‘Counsel-Witness Relations and Professional Misconduct in Civil Law Systems’, 19 Arb. Int’l 457, 461 (2003). 5   See Patrick Thieffry, ‘European Integration in Transnational Litigation’, 13 B.C. Int’l & Comp. L. Rev. 339, 356–7 (1990) (‘US-style procedural rules, the absence of which US litigants tend to criticize in European courts, are precisely those considered to be the most outrageous by European litigants in US courts.’). 6  Henri Ader, ‘Differences and Common Elements in Legal Ethics in France and the United States’, in John J. Barceló III and Roger C. Cramton (eds.), Lawyers’ Practice & Ideals: A Comparative View (1999) 351, 359. Thomas Starkey, a sixteenth-century reformer, denounced the common law as ‘barbaric’ and hoped ‘to see it replaced by the systematic Roman law of the Italian schools or at least reduced to codified order’. G.R. Elton, Reform and Reformation (1977) 167. 7  See Serge Lazareff, ‘International Arbitration: Towards a Common Procedural Approach’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 31, 31 (noting an increasing awareness among both arbitrators and practitioners of ‘an emerging “harmonised procedural pattern” in international arbitration’). 8  Andreas F. Lowenfeld, ‘Introduction: The Elements Of Procedure: Are They Separately Portable?’ 45 Am. J. Comp. L. 649, 654 (1997) (‘By now, cross-examination by counsel is pretty well accepted in international arbitrations, and for the most part the continental lawyers have learned how to do it. Moreover, and almost as important, arbitrators have learned how to administer cross-examination.’); Julian D.M. Lew and Laurence Shore, ‘International Commercial Arbitration: Harmonizing Cultural Differences’, 54 Disp. Resol. J. 32, 34–5 (1999) (noting that when cross-examination is permitted in arbitrations, attorneys are encouraged, through strict time limits, to focus their questioning on the most important issues). 9  See Andreas F. Lowenfeld, ‘Introduction: The Elements of Procedure: Are They Separately Portable?’ 45 Am. J. Comp. L. 649, 654–5 (1997) (arguing that lessons learned in international arbitration can aid in refining national and international adjudicatory techniques and procedures). 10  The reasons for the different pace of innovation are explored in greater detail in paras 3.08–3.09. 11  See paragraphs 1.06–1.07 for a description of survey addressing these issues.

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Attorneys, Barbarians, and Guerrillas Ethical uncertainty creates a potential trap for even the most well-intentioned participants 3.05 acting in good faith. Increasingly, however, it also provides fertile ground for less scrupulous participants to engage in ‘guerrilla tactics’.12 In a recent survey, 68% of respondents reported that they had experienced what they believed were guerrilla tactics in international arbitration.13 The study did not define ‘guerrilla tactics’ because the authors posited that ‘what needed to be discovered is whether counsel and arbitrators felt such tactics were being used and to learn what kinds of tactics they felt deserved to be labelled “guerrilla tactics” ’.14 In fact, conduct that some attorneys identify as ‘guerrilla tactics’ may be defended as case legitimate strategy by others. Would-be guerrillas are enabled by the absence of a common yardstick for evaluating attorney conduct and emboldened by the absence of sanctions or enforcement mechanisms. Long pre-dating these modern concerns, in 1971, Professor Michael Reisman recognized 3.06 that counsel in international arbitration needed to be regulated at an international level.15 A few early scholars echoed Professor Reisman’s initial call.16 It was not until 2002 that observations about a general need began to translate into specific proposals for reform.17 In more

12  See Michael Hwang, ‘Why is there Still Resistance to Arbitration in Asia’, in Gerald Aksen et al. (eds.), Global Reflections on International Law, Commerce and Dispute Resolution: Liber Amicororum in honour of Robert Briner (2005) 401, 401–5; Stephan Wilske, ‘Crisis? What Crisis?: The Development of International Arbitration in Tougher Times’, 818 PLI/Lit 309, (2010). 13  Edna Sussman and Solomon Ebere, ‘All’s Fair in Love and War—Or Is It? Reflections on Ethical Standards for Counsel in International Arbitration’, 22 Am. Rev. Int’l Arb. 611, 612 (2011). 14  Sussman and Ebere, ‘All’s Fair in Love and War’ 612. 15  See W. Michael Reisman, Nullity and Revision: The Review and Enforcement of International Judgments and Awards (1971) 116–7. 16  See Detlev F. Vagts, ‘The International Legal Profession: A Need for More Governance?’ 90 Am. J. Int’l L. 250, 250 (1996) (describing problems in Iran Claims Tribunal caused by lack of ethical consensus among attorneys); Jan Paulsson, ‘Standards of Conduct for Counsel in International Arbitration’, 3 Am. Rev. Int’l Arb. 214 (1992) (stating that national ethical rules of counsel may conflict in international practice); Edward R. Leahy and Kenneth J. Pierce, ‘Sanctions to Control Party Misbehavior in International Arbitration’, 26 Va. J. Int’l L. 291, 293 (1986) (stating that party misconduct is increasing and recommending several means of controlling counsel and party misbehaviour in international commercial arbitration); see also V.V. Veeder, QC, ‘The 2001 Goff Lecture: The Lawyer’s Duty to Arbitrate in Good Faith’, 18 Arb. Int’l 431 (2002) (discussing the international lawyer’s duty of good faith and the possibility of implementing more concrete attorney behavioural standards). These works built on an already robust body of literature about the need to regulate global legal practice more generally. See Detlev F. Vagts, ‘Professional Responsibility in Transborder Practice: Conflict and Resolution’, 13 Geo. J. Legal Ethics 677 (2000) (discussing methods of harmonizing international ethical standards); Detlev F. Vagts, ‘The Impact of Globalization on the Legal Profession’, 2 Eur. J. L. Reform 403, 410–1 (2000) (discussing the lack of ethical standards or overseeing body in international arbitration); Mary C. Daly, ‘The Dichotomy Between Standards and Rules: A New Way of Understanding the Differences in Perceptions of Lawyer Codes of Conduct by US and Foreign Lawyers’, 32 Vand. J. Transnat’l L. 1117, 1154 and n. 184 (1999) (describing ethical conflicts in the Yugoslav War Crimes Tribunal); Robert M. Jarvis, ‘CrossBorder Legal Practice and Ethics Rule 4-8.5: Why Greater Guidance Is Needed’, 72-FEB Fla. B.J. 59 (1998) (suggesting amending Florida Rules of Professional Conduct Rule 4-8.5 to clarify cross-border practitioners’ ethical obligations); Malini Majumdar, ‘Ethics in the International Arena: The Need for Clarification’, 8 Geo. J. Legal Ethics 439, 451–2 (1995) (proposing an international code of ethics for all GATT signatory countries based on the CCBE Code and IBA Rules); John Toulmin, ‘A Worldwide Common Code of Professional Ethics?’ 15 Fordham Int’l L.J. 673, 685 (1992) (discussing application of an international ethical code in the US based on the CCBE code); Hans Smit, ‘The Future of International Commercial Arbitration: A Single Transnational Institution?’ 25 Colum. J. Transnat’l L. 9, 29 (1986) (proposing an international arbitration institution that could establish an international code of ethics for arbitrators). 17  Catherine A. Rogers, ‘Fit and Function in Legal Ethics: Developing a Code of Conduct for International Arbitration’, 23 Mich. J. Int’l L 341 (2002); Catherine A. Rogers, ‘Context and Institutional Structure in Attorney Regulation: Constructing an Enforcement Regime for International Arbitration’, 39 Stan. J. Int’l L. 1 (2004).

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Attorneys, Barbarians, and Guerrillas recent years, numerous commentators, scholars, and practitioners have joined the growing chorus calling for action.18 In response, several international organizations have developed or are working to develop rules, guidelines, and codes. 3.07 One of the most important milestones is the work by the International Bar Association’s Task

Force on the Professional Conduct of Counsel in International Arbitration (Task Force).19 In 2013, the IBA published Guidelines for Party Representation in International Arbitration. A second important initiative, still in the works as this book is going to press, is the creation by the LCIA of a set of guidelines that are annexed to the LCIA arbitral rules and presumably will be enforcable by arbitrators in LCIA arbitrations. Finally, although aimed expressly at parties (not counsel or representatives) new revisions to the AAA Commercial Arbitration Rules that became effective as of October 2013 authorize an arbitrator, upon request, to order ‘appropriate sanctions’ on account of a party’s failure to comply with AAA rules or an order of the arbitration. The rule requires that the arbitrator give the party against whom sanctions are requested the opportunity to respond to a request for sanctions, and specifically prohibits the arbitrator from entering a default as a sanction.20 These developments are discussed in greater detail in Chapter 6. This chapter focuses on some of the underlying problems these new guidelines and rules are aimed at resolving.

18   See, e.g., Charles N. Brower and Stephan W. Schill, ‘Regulating Counsel Before International Tribunals’, in Bekker et al. (eds.), Making Transnational Law Work in a Global Economy: Essays in Honour of Detlev Vagts (2010) 488, 489 (arguing for creation of a new code of ethics for counsel in international arbitration and new powers for arbitrators to enforce such rules); Doak Bishop, Ethics in International Arbitration, Speech at the International Council for Commercial Arbitration Conference in South America (26 May 2010), ; Doak Bishop and Margrete Stevens, ‘The Compelling Need for a Code of Ethics in International Arbitration: Transparency, Integrity and Legitimacy’, (appending a proposed draft code of ethical rules); Carolyn B. Lamm et al., ‘Has the Time Come for an ICSID Code of Ethics for Counsel?,’ in Karl Sauvant (ed.), 2009–2010 Y.B. Int’l Inv. L. & Pol’y (2010); Cyrus Benson, ‘Can Professional Ethics Wait? The Need for Transparency in International Arbitration’, 3 Disp. Resol. Int’l 78, 83 (2009) (answering the titular question in the negative and proposing a non-binding ethical ‘checklist’); Robert W. Wachter, ‘Ethical Standards in International Arbitration: Considering Solutions to Level the Playing Field’, 24 Geo. J. Legal Ethics 1143 (2011); John M. Townsend, ‘Clash and Convergence on Ethical Issues in International Arbitration’, 36 U. Miami Inter-Am. L. Rev. 1 (2004); see also Brian Cooper, ‘Ethics for Party Representatives in International Commercial Arbitration: Developing a Standard for Witness Preparation’, 22 Geo. J. Legal Ethics 779 (2009); Carrie Menkel-Meadow, ‘Are There Systematic Ethics Issues in Dispute System Design? And what We Should [Not] Do About It: Lessons from International and Domestic Fronts’, 14 Harv. Negot. L. Rev. 195, 228–9 (2009); Carrie Menkel-Meadow, ‘Are Cross-Cultural Ethics Standards Possible or Desirable in International Arbitration?’ in Peter Gauch et al. (eds.), Melanges en l’Honneur de Pierrie Tercier (2008) 883; Steven C. Bennett, ‘Who Is responsible for Ethical Behavior By Counsel in Arbitration’, 63-JUL Disp. Resol. J. 38 (May–July 2008). There are also some scholars who have argued against development of specialized regulation for international arbitration practice. Kristen Weisenberger, ‘Peace is Not the Absence of Conflict: A Response to Professor Rogers’s Article “Fit and Function in Legal Ethics”’ 25 Wisc. Int’l L.J. 89, 89–128 (2007) (arguing that extant rules of conduct are adequate for the purpose of regulating international arbitrations, and a conflict-of-laws approach is the best option). See also Christopher J. Whelan, ‘Ethics Beyond the Horizon: Why Regulate the Global Practice of Law?’ 34 Vand. J. Transnat’L L. 931, 931–52 (2001) (tentatively accepting the inevitability of global regulation of attorneys, but questioning its desirability). It has also become a popular topic at international arbitration conferences. See, e.g., Stephan Wilske, Presentation, Sanctions for Unethical and Illegal Behavior in International Arbitration: a Double-Edged Sword? (Taipei, Taiwan, 17 Sept. 2010). 19  The author served as a member of the Task Force, though joined a few years after it had initially been constituted. In light of obligations as a member of the Task Force, commentary on the substantive content of the Guidelines is necessarily limited. 20  AAA Commercial Arbitration Rules, R-58 (sanctions).

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Counsel ethics in international arbitration proceedings One interesting question, before turning to substance, is why development of interna- 3.08 tional ethical standards has lagged so far behind the development of procedural standards. The current flurry of efforts aimed at professional conduct in arbitral proceedings is occurring nearly 15 years after the original promulgation of the IBA Rules on the Taking of Evidence in 1999. One reason for the time lag is that procedural rules are generally regarded as default rules, and thus subject to party autonomy in ordering arbitral proceedings.21 Ethical rules, meanwhile, are generally regarded as mandatory rules, and not subject to modification. In a related vein, there are jurisdictional questions since attorneys are not formally parties to the arbitration agreement, which is the primary source (directly or indirectly) of procedural rules. Finally, lawyers are educated and trained in national legal systems and enjoy status as attorneys only because they are licensed by national regulatory authorities. Since lawyers are a product of national bar authorities, it seems implausible that international arbitration could wrest ethical regulation from those authorities. Building on regulatory trends identified in Chapter 1,22 these assumptions are challenged in the proposal for self-regulation developed in Chapter 6. That chapter questions outdated assumptions that lawyers are predominantly creatures of national legal systems that should be subject to exclusive regulation by national bar authorities. This chapter sets the background for that later analysis by surveying the uniquely cross-cultural and international ethical problems implicated in international arbitration. Section A begins by analysing the systemic problems that can arise when attorneys from 3.09 different systems with differing ethical obligations and assumptions participate in a single international arbitral proceeding. Section B then surveys the substance of the most common and salient ethical conflicts that arise with regard to the conduct of counsel. It begins the survey with the seminal example of pre-testimonial communication with witnesses to explore the gap created by procedural innovations and left open by the current ethical ‘quick fix.’ This analysis lays the groundwork for Chapter 7, where I propose the Functional Thesis for developing such substantive rules for international arbitration.

A.  Counsel ethics in international arbitration proceedings International arbitration succeeds by detaching substantive decision-making and proce- 3.10 dural frameworks from the apparatus of domestic legal systems. One consequence of that detachment is that it also disconnects counsel who appear in international arbitrations from the national institutions that generally regulate them, but the extent and nature of that detachment from national systems is not entirely clear. The result is an atmosphere of ethical ambiguity, as described in Subsection 1. That ambiguity creates specific challenges for the proper functioning of international arbitral proceedings, analysed in Subsection 2.

21  Christopher R. Drahozal, ‘Contract and Procedure’, 94 Marq. L. Rev. (2011) 1103, 1114 (‘[M]‌ost arbitral rules function like default rules (generally subject only to the mandatory rules of the arbitral forum). They generally provide that the arbitrator will conduct the proceedings in a manner consistent with the parties’ agreement and, only when such agreement is lacking, may exercise his or her discretion.’). 22  See Chapter 1.

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Attorneys, Barbarians, and Guerrillas 1.  A-national legal ethics? 3.11 It is often said that international arbitration occurs in an a-national space.23 While

arbitration physically takes place within the geographic boundaries of one nation, the so-called ‘host State’ is by design largely constrained and detached from arbitral proceedings.24 As explained in Chapter 1, States’ interest in attracting more international arbitration has led to express exemptions from local ethical rules for foreign attorneys appearing in locally seated international arbitrations.25 Meanwhile, attorneys’ home jurisdictions have historically acted as if their hands are tied with respect to conduct that occurs in foreign jurisdictions, including in foreign-seated arbitrations. Few bar authorities expressly extend their ethical rules and regulatory authority extraterritorially or into foreign arbitration contexts.26 Finally, the prevailing, though shifting, view is that international arbitrators do not have the power to sanction or directly regulate attorneys appearing before them.27 The practical consequence of these conditions is that counsel are almost completely free from ethical regulation (or guidance) in international arbitral proceedings.28

23  See Yves Dezalay and Bryant Garth, Dealing in Virtue: International Arbitration and the Construction of a Transnational Legal Order (1996) 17. ‘In most international arbitrations, the situs for arbitration is chosen either by happenstance, for reasons of logistics and convenience, or because of its neutrality in relation to the dispute and to the parties.’ Thomas E. Carbonneau, ‘The Remaking of Arbitration: Design and Destiny’ in Thomas E. Carbonneau (ed.), Lex Mercatoria and Arbitration (1998) 27. 24  The New York Convention generally permits the nation where arbitration takes place to exercise an expanded role in reviewing arbitral awards. In an effort to attract more international arbitration, however, many nations have declined this opportunity and have instead legislated to constrain court review of awards from arbitrations taking place within their boundaries. See William W. Park, ‘National Law and Commercial Justice: Safeguarding Procedural Integrity in International Arbitration’, 63 Tul. L. Rev. 647, 649 (1989). 25  See Brand, ‘Professional Responsibility in a Transnational Transactions Practice’, 17 J.L. & Comm. 301, 335 (noting that notwithstanding applicability of State ethical rules to State-licensed attorneys, a bar opinion permits parties to international arbitration to be represented by non-State-licensed attorneys); Toby S. Myerson, ‘The Japanese System’, in Mary C. Daly and Roger J. Goebel, (eds.), Rights Liability and Ethics in International Legal Practice (1994) 69 (noting that even traditionally restrictive Japanese law changed recently to permit non-Japanese-licensed attorneys to engage in international arbitrations in Japan). The problem is that, notwithstanding attempts to shoehorn ethical rules into the arbitration context, drafters of ethical norms simply did not directly address the extension of their application into the arbitration context. See Carrie Menkel-Meadow, ‘Ancillary Practice And Conflicts Of Interests: When Lawyer Ethics Rules Are Not Enough’, 13 Alternatives to High Cost Litig. 15 (1996) (‘[T]‌he ABA Model Rules of Professional Conduct were not drafted with ADR in mind and efforts to fit ADR practice into the rules of more conventional advocacy will not always work.’); Vagts, ‘The International Legal Profession’ 378 (noting that it is unclear whether the Model Rules apply in arbitration proceedings). In the setting of international arbitration, debate about the nature and extent to which national ethical norms apply is even more open-ended. See Peter C. Thomas, ‘Disqualifying Lawyers in Arbitrations: Do the Arbitrators Play Any Proper Role?’ 1 Am. Rev. Int’l Arb. 562 (1990) (‘When an English barrister suggested a couple of years ago that an advocate in a private commercial arbitration was not bound by the same duties owed by counsel to a court, the immediate (near unanimous) response was shock and indignation.’). 26  See Wachter, ‘Ethical Standards in International Arbitration’ 1143 (‘There is no obvious answer to the question [of which ethical rules apply], and one or more sets of rules might apply, including the rules where the attorney is licensed, the foreign jurisdiction where the attorney works, the rules of the seat of arbitration, the rules adopted by the arbitral tribunal, or the rules where the conduct occurs.’). 27  The topic of arbitrators’ authority to regulate or sanction counsel is taken up in Chapter 6. 28  See Ivo G. Caytas, Transnational Legal Practice: Conflicts in Professional Responsibility (1992) 3 (‘[I]‌t is fairly rare that misconduct “abroad” results in all too serious consequences “at home” (examples not­ withstanding) . . . [S]anctions remain essentially local.’); Rogers, ‘Fit and Function in Legal Ethics’ 342.

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Counsel ethics in international arbitration proceedings Attorneys generally assume that their ‘home’ ethical rules—meaning the rules of the jurisdic- 3.12 tion where they are licensed—apply in international arbitration.29 That seemingly easy-toapply assumption is not always easy to apply to advocates in a typical international arbitration. Most international arbitrations are staffed by a team of lawyers who, both individually and collectively, are distinctively multinational. Individually, many international arbitration practitioners are licensed in more than one jurisdiction.30 As a result, they likely have more than one set of ‘home’ ethical rules that could apply in an international arbitration. Moreover, the teams of lawyers who staff international arbitration, almost inevitably, are licensed in several different jurisdictions. As a result, attorneys on the same team working for the same client may be subject to different home ethical rules, even if there remains significant uncertainty about whether home ethical rules actually apply. Some commentators have suggested this confusion can be eliminated by applying the ethical 3.13 rules of the arbitral seat.31 While this approach would seem to avoid the problems associated with application of potentially multiple home rules of each participating attorney, it raises problems of its own. First, as noted in Chapter 1, in an effort to attract international arbitration business, most jurisdictions have expressly exempted foreign attorneys appearing in locally seated arbitrations from the need to be locally licensed and, by implication, from having to abide by local ethical rules.32 Second, the physical location of most international tribunals is either a random choice 3.14 produced through historical accident, negotiation, and compromise, or a choice predicated on other non-substantive issues such as convenience.33 As a result, with only limited exceptions, the substantive law and procedural traditions of the legal seat have little relevance to the parties’ dispute. Given this detachment from international arbitral procedures, the legal seat has even less relevance to the ethical conduct of lawyers who appear pursuant to those procedures.34 Making counsel subject to ethical rules of the legal seat

29   See IBA Task Force on Counsel Conduct in Arbitration Survey (Sept. 2010) (on file with author) (reporting that approximately 64% of respondents believe home ethical rules govern their conduct, and another 27% follow home ethical rules in an abundance of caution). See also Henri Alvarez, ‘Autonomy of International Arbitration Process’, in Loukas Mistelis and Julian Lew (eds.), Pervasive Problems in International Arbitration (2006) 6–16. 30  For example, an informal survey of the practice group websites of the ten of the leading firms in international arbitration indicates that 42% of all attorneys practising in the area of international dispute resolution are licensed in more than one jurisdiction, 23% in more than one national jurisdiction (4% in three or more countries), and (for US practitioners) 21% were licensed in more than one US jurisdiction. See ‘Arbitration Scorecard 2011: Top Arbitration Firms: The firms handling the most arbitrations in 2009–10’, Am. Law. 1 July 2011. 31  Kristen Weisenberger, ‘Peace is Not the Absence of Conflict’, 89–128. See also Catherine A. Rogers, ‘Lawyers Without Borders’, 30 U. Pa. J. Int’l L. 1035, 1050 (2009) (discussing US Model Rule 8.5’s application of the ethical rules of the jurisdiction where a tribunal ‘sits’). 32  See Chapter 1, paras 1.77–1.104. 33  For example, the US-Iran Claims Tribunal was located in The Hague because of the ready availability of The Peace Palace, support from the Dutch government, and The Hague’s history of neutrality. See Michael I. Kaplan, ‘Solving the Pitfalls of Impartiality when Arbitrating in China: How the Lessons of the Soviet Union and Iran Can Provide Solutions to Western Parties Arbitrating in China’, 110 Penn St. L. Rev. 769 (2006) (attributing the success of the Tribunal to The Hague’s ‘chronicled history of neutrality’). 34  There are some instances in which international tribunals have jurisdiction over domestic crimes, which may imply the presence of lawyers from the relevant jurisdiction. For example, the Special Tribunal for Lebanon is a treaty-based Tribunal that was established through a resolution of the UN Security Council. It is unique, and somewhat controversial, in that it depends solely on substantive crimes that are defined under domestic Lebanese law. See Nidal Nabil Jurdi, ‘The Subject-Matter Jurisdiction of the Special Tribunal For Lebanon’, 5 J. Int’l Crim. Just. 1125, 1126 (2007).

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Attorneys, Barbarians, and Guerrillas could produce some anomalous results. Imagine, for example, an American and a Russian party selecting Italy as a seat for reasons of convenience, not realizing that that selection would have implications for their attorneys’ professional obligations to them as clients. It might be a rude awakening for a US client and its counsel to learn that, under Italian ethical rules, it is impermissible to speak to witnesses before they testify. 3.15 An added complication with reliance on the ethical rules of the seat is that they would seem

to apply only if and when an arbitration were actually commenced. Before that time, the legal seat has no relevance to counsel conduct. If no arbitration were ever commenced, or if a dispute between the parties were for some reason introduced in another forum (such as a national court case challenging the enforceability of the arbitration agreement), the ethical rules of the seat would seem to have no application.

3.16 Some legal systems, discussed in detail later, have choice-of-law provisions that would nev-

ertheless make the rules of the host jurisdiction applicable to counsel in international arbitration. Since not all national ethical regimes have a similar choice-of-law provisions, those choice-of-law provisions do not level the playing field. Instead, they ensure that their local attorneys are bound by ethical rules that are most likely unrelated to the arbitral proceedings and to the rules that apply to opposing counsel’s conduct. For example, under the US choice-of-law rule, an attorney licensed in Washington DC appearing before the Iran-US Claims Tribunal would be bound by Dutch ethical rules because the Tribunal is seated in The Hague. Dutch ethical rules have no reasonable relationship to the proceedings before the Tribunal (and are generally unfamiliar to both counsel and arbitrators). Informal survey research reveals that attorneys and arbitrators at the Tribunal have no idea that at least some US jurisdictions would make Dutch ethical rules applicable. Meanwhile, Iranian representatives are not bound by Dutch ethical rules, but would instead remain subject to what, if any, Iranian ethical rules may apply.

3.17 Even if the national ethical rules of the seat could be applied evenly to all counsel and rep-

resentatives subject to the same obligations, they would be an unsatisfactory solution. One of the premier accomplishments of the New York Convention was to liberate arbitral proceedings from most local law.35 The purpose was to afford the parties (and by extension the arbitrators) maximum flexibility in structuring the arbitral proceedings to suit the specific needs of their case. Application of local ethical rules would re-introduce restrictions that the Convention sought to reduce or eliminate. It would also be inconsistent with various efforts to reduce the restrictions on foreign counsel appearing in locally seated international arbitrations. 2.  The effect of a-national ethical rules in arbitral proceedings

3.18 Attorneys often shift conduct based on context, even within national legal systems. For

example, an attorney appearing in a national court of first instance would conduct himself or herself differently than if appearing before an administrative tribunal, an appellate court, a constitutional, or a supreme court within the same system. The shift in conduct

35  Mandatory local law may still apply in arbitral proceedings, but in most developed jurisdictions, the scope of such law is quite limited. See Gary B. Born, International Commercial Arbitration (2009) 1241. This limited application of mandatory law is in stark contrast to the assumption that prevailed prior to the Convention, that an award could not be enforceable unless it was perfectly consistent with all local law, regardless of the law selected by the parties. Kristen Weisenberger, ‘Peace is Not the Absence of Conflict’, 1255.

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Counsel ethics in international arbitration proceedings to adjust to these various national adjudicatory contexts is much more subtle than the shift required to adjust from national court proceedings to international arbitral proceedings. Attorneys’ presumptive, though not definitive, allegiance to home ethical rules in international arbitration may interfere with this adjustment, causing three distinct types of problems. The first, and arguably most severe, problem from an attorney’s perspective is sometimes 3.19 referred to by ethicists as the ‘double deontology’ problem. When an attorney is subject to two conflicting ethical rules, the attorney may potentially be subject to discipline (or other professional sanction) regardless of what course of action the attorney chooses. In international arbitration, for example, the ethical rules or law of the arbitral seat or rules adopted by an arbitral tribunal may require disclosure of information that an attorney’s home ethical rules require be maintained as confidential. This situation would present a ‘double deontology’ problem if the rules or law of the seat were mandatory. Similarly, an arbitral tribunal could order an attorney to do something that is prohibited by his or her local ethical rules. Disobeying a direct order from the tribunal would arguably create a similar double deontology problem if an attorney were ethically obliged to obey tribunal orders. In either of these situations, the attorney is facing a catch-22.36 Whichever course of action 3.20 the attorney follows, he or she will be violating at least one rule and therefore be subject to possible sanctions.37 In fact, some attorneys have been caught up in such untenable situations. A German attorney, who would have been subject to professional discipline for violating a client’s confidence, refused to make a disclosure required by the British Proceeds of Crime legislation and ended up being imprisoned on criminal charges.38 In 2007, an American-licensed attorney who was a French national employed with a major US law firm was criminally convicted and ordered to pay a €10,000 fine in France for interviewing a witness in France for the purposes of obtaining information for a court proceeding in the United States in violation of French law.39 A second problem, which is more of a problem for the arbitral proceedings than for indi- 3.21 vidual attorneys, relates to procedural fairness. When attorneys in a single international proceeding abide by different ethical standards, the proceedings can be structurally unfair. The now-paradigmatic illustration of the problem, which will be discussed in more detail later in this chapter, is pre-testimonial communication between counsel and witnesses. Domestic ethical rules and practices, reinforced by education and training, prohibit counsel from many civil law jurisdictions from communicating with witnesses about facts of the case or upcoming testimony. In some civil law systems such ‘misconduct’ might be punishable by serious 36  A ‘catch-22’ is an idiomatic expression meaning a ‘no-win’ or a ‘double bind’ situation. The reference comes from Joseph Heller’s famous novel of the same title, which takes place on a Mediterranean Island off the coast of Italy in the latter phases of the Second World War. In Heller’s account, a catch-22 is used to justify irrational bureaucratic operations. In this context, the phrase signals the potential peril of (not a justification for) bureaucratic imposition of sanctions regardless of what course of conduct the attorney chooses. 37  See Hans-Jürgen Hellwig, ‘At the Intersection of Legal Ethics and Globalization: International Conflicts of Law in Lawyer Regulation’, 27 Penn St. Int’l L. Rev. 395, 398–9 (2008). 38  Hans-Jürgen Hellwig, ‘At the Intersection of Legal Ethics and Globalization: International Conflicts of Law in Lawyer Regulation’, 399 (describing a German attorney who was imprisoned in London for refusing to disclose information deemed confidential under German law). 39  See Paris Court of Appeals, File n. 06/06272, Judgment of 28 March 2007 (unofficial translation on file with author).

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Attorneys, Barbarians, and Guerrillas criminal penalties for witness ‘tampering’.40 US attorneys, on the other hand, are educated and trained to believe that ‘preparing’ a witness to testify is not only standard practice,41 but also necessary to avoid committing malpractice, if not an ethical breach.42 3.22 In that context, as Detlev Vagts explains:43

[I]‌t would not be workable to allow the counsel for opposing sides . . . to enter the courtroom subject to different rules . . . It would not do to prohibit one lawyer from a civil law jurisdiction from interviewing a witness before the trial while the American lawyer would not only be allowed to do so but would be guilty of professional negligence if he or she presented an un-interviewed witness.

This imbalance can create what might be called an ‘inequality-of-arms problem’.44 Practitioners and commentators have observed that such inequities can affect the integrity and legitimacy of international arbitration itself, as well as jeopardize the enforceability of particular awards.45 3.23 The third problem, implicit in the first two problems, is what might be called a choice-of-law

or conflicts-of-law problem. The examples of ethical conflict described previously effectively presume that certain rules can or do apply. In reality, it is not at all clear when or how particular ethical rules apply in international arbitration. Although formal ethical rules are most strongly associated with an attorney’s licensing authority, their relevance and application are affected by a host of other considerations. Consider, for example, which ethical rules govern

40   See Mirjan Damaska, ‘Presentation of Evidence and Factfinding Precision’, 123 U. Pa. L. Rev. 1083, 1088–9 (1975) (‘ “Coaching” witnesses [in inquisitorial systems] comes dangerously close to various criminal offenses of interfering with the administration of justice’ as well as being contrary to professional canons of ethics). 41   See Hamdi & Ibrahim Mango Co. v Fire Ass’n of Phila., 20 F.R.D. 181 (S.D.N.Y. 1957) (acknowledging that it is a usual and legitimate practice for ethical and diligent counsel, in preparing their witnesses for either deposition or trial testimony, to confer with each witness before testimony is given). Similarly, in England, barristers routinely interview client and expert witnesses, and solicitors interview fact witnesses as well as review potentially difficult questions that may come up on cross-examination. See also Wolfram, Modern Legal Ethics (1986), § 12.4.3, 648, 648 n. 92 (1986) (citing H. Cecil, Brief to Counsel, 2nd edn. (1972) 102). 42   Although not defined in US codes as a formal ethical obligation, several courts have treated failure to prepare a witness as a breach of the duty of competent representation. See, e.g., District of Columbia Bar, ‘Opinion No. 79: Limitations on a Lawyer’s Participation in the Preparation of Witness Testimony,’ Code Prof. Resp. & Opinions D.C. Bar Legal Ethics Comm. (1991) 138, 139 (stating that an attorney who had the opportunity to prepare a witness, but failed to do so, would not be properly fulfilling his or her professional obligations); In re Stratosphere Corp. Sec. Litig., 182 F.R.D. 614 (D. Nev. 1998) (characterizing witness preparation as an ‘ethical’ obligation incumbent on attorneys); Hall v Clifton Precision, 150 F.R.D. 525, 528 (E.D. Pa. 1993) (implying that an attorney has the right and the duty to prepare a client for deposition). Under this view, witness preparation would be another example of a double deontology problem, as discussed. 43  Vagts, ‘Professional Responsibility in Transborder Practice’ 690. 44  Robinson v Jamaica, U.N. Human Rights Committee, Communication No. 223/1987, at 2.1, 10.3– 10.4, U.N. Doc. CCPR/C/35/D/223/1987 (1989) (finding inequality of arms as to witness access and lack of legal representation). 45  See Charles N. Brower and Stephan W. Schill, ‘Regulating Counsel Conduct before International Arbitral Tribunals’, 491 (adopting a definition of ‘legitimacy’ as acceptance of ‘a rule or rule-making institution which itself exerts a pull toward compliance on those addressed normatively because those addressed believe that the rule or institution has come into being and operates in accordance with generally accepted principles of right process’.); Thomas E. Carbonneau, ‘The Remaking of Arbitration: Design and Destiny’, in Lex Mercatoria and Arbitration (1998) 23, 27 (‘Contrastive procedural traditions provide for different concepts of justice and, as a result, are difficult to reconcile. Arbitration’s legitimacy as a mechanism for transnational adjudication depends upon how fair the governing procedures are or are perceived to be by the constituent parties.’).

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Counsel ethics in international arbitration proceedings a New York lawyer’s confidentiality obligations to his or her French client in a Singaporeseated arbitration against a Japanese company that is represented by the German office of an English law firm? Most attorneys faced with this question could offer only a confused shrug. Most national bar authorities could not do much better. A few national ethical rules have recently incorporated choice-of-law rules designed to aid 3.24 attorneys in determining which ethical rules apply to particular conduct outside the jurisdiction (and determine which rules would apply in the event of disciplinary proceedings). Despite the good intentions, most choice-of-law rules regarding ethics end up being like the mechanized voice on a GPS device that unambiguously directs you to ‘TURN LEFT AND CONTINUE ON’ despite the fact that the road to the left is a dead end. For example, US Model Rule 8.5 provides that ‘for conduct in connection with a mat- 3.25 ter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits [shall apply], unless the rules of the tribunal provide otherwise’.46 An initial problem (and sign that the drafters of Model Rule 8.5 either did not understand or did not specifically consider international arbitration) is that the relevant touchstone for international arbitral tribunals is not where they ‘sit’, but where they have their legal ‘seat’.47 The larger problem, noted here and in Chapter 1, is that most jurisdictions intentionally exclude lawyers in locally seated international arbitrations from local ethical regulation.48 Model Rule 8.5, therefore, subjects attorneys to ethical rules that, by their own terms, do not purport to apply to those attorneys’ conduct. While it may not be necessary to have complicity with the jurisdiction whose ethical rules are deemed to govern, unlike other choice-of-law contexts, as described in more detail in Chapter 6, applying foreign ethical rules by disciplinary authorities probably requires some degree of regulatory coordination.49 Efforts at choice-of-law guidance by the Council of Bars and Law Societies of Europe (CCBE) 3.26 did not fare much better. The CCBE is an entity charged with regulating cross-border practice in Europe. To that end, it developed a Code of Conduct that governs various aspects of cross-border practice in Europe. For appearance before arbitral tribunals, the Code 46   The full text of Rule 8.5(b) reads as follows: ‘(b) Choice of Law. In any exercise of the disciplinary authority of this jurisdiction, the rules of professional conduct to be applied shall be as follows: (1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and (2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.’ Model Rules of Prof ’l Conduct, R. 8.5 (2002). 47  The distinction between where a tribunal ‘sits’ and its legal ‘seat’ would not be intuitively obvious for domestic practitioners unfamiliar with international tribunals. As I have explained elsewhere: International tribunals may ‘sit’ in one place, but have their ‘seat’ in another. For example, the Statute for the International Tribunal for the Law of the Sea provides that the Tribunal has its ‘seat’ in ‘the Free and Hanseatic City of Hamburg in the Federal Republic of Germany’, but ‘may sit and exercise its functions elsewhere whenever it considers this desirable’. Catherine A. Rogers, ‘Lawyers Without Borders’, 1050. Even if national rules are borrowed for international arbitration as a temporary solution, however, ‘those rules should not be identified based on the jurisdiction where an international arbitration tribunal “sits”, but instead where it has its “seat”. Otherwise, Rule 8.5 ascribes to the place where a tribunal sits an importance that was never intended by either the architects of these tribunals or the parties appearing before them.’ Catherine A. Rogers, ‘Lawyers Without Borders’, 1051. 48  See Chapter 1, paras 1.77–1.87. 49  See Chapter 6, paras 6.159–6.165.

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Attorneys, Barbarians, and Guerrillas provides: ‘A lawyer who appears, or takes part in a case, before a court or tribunal must comply with the rules of conduct applied before that court or tribunal.’50 The problem, of course, is that international arbitral tribunals do not have any ethical rules that automatically apply. The other choice-of-law rule in the CCBE Code is equally unhelpful: it simply suggests that attorneys who conduct legal activities in another Member State jurisdiction inform themselves about the rules of the other Member State jurisdiction,51 but is silent about what to do in the event of a conflict or double deontology problem. 3.27 With respect to a few particularized conflicts, the CCBE Code seeks to provide work-arounds

that obviate stand-offs, but stops short of providing real choice-of-law guidance. For example, the CCBE takes up the conflicts between national ethical rules regarding receipt of ‘confidential’ communications from opposing counsel. As described in greater detail later, some systems impose an obligation to withhold the communication as confidential, whereas other systems require an attorney to communicate the same information to his or her client.52 Instead of adopting a definitive rule resolving the conflicting approaches, Rule 5.3 of the CCBE Code instructs that if an attorney wants correspondence handled confidentially, he or she should clearly state such. If the addressee is not able to withhold the correspondence from the client, the receiving attorney must return it without revealing its contents.53 The CCBE is careful not to treat this provision as a choice-of-law rule, even if it effectively chooses between the competing rules by precluding the receiving attorney from revealing the contents.

3.28 Perhaps the most thoughtful effort at a choice-of-law rule is that of the Solicitors Regulation

Authority (SRA) regarding ‘overseas practice’.54 Its new Code, effective as of October 2011, provides detailed analysis of what rules apply, do not apply, or apply differently in ‘overseas practice.’55 Unfortunately, ‘overseas practice’ is defined narrowly to include only ‘practice from an office outside England and Wales [or in certain cases] practice from an office in Scotland or Northern Ireland’.56 The specialized applications, in other words, do not generally apply to an attorney who is based in a London office, but appearing before an international arbitral tribunal in, for example, Dubai. This limitation is underscored, for example, in Chapter 5 of the Code (dealing with clients and courts), which provides that ‘[t]‌he outcomes in this chapter apply to your overseas practice in relation to litigation or advocacy conducted before a court, tribunal or enquiry in England and Wales or a British court martial’. There is no separate guidance about what should happen when an attorney appears before a foreign or international tribunal. This latter topic is evidently due to be   CCBE Code of Conduct for European Lawyers, art. 4.1 (2010).   Article 2.4 of the CCBE Code provides: ‘When practising cross-border, a lawyer from another Member State may be bound to comply with the professional rules of the Host Member State. Lawyers have a duty to inform themselves as to the rules which will affect them in the performance of any particular activity.’ CCBE Code of Conduct, Art. 2.4. 52  See paras 3.64–3.69. 53  CCBE Code of Conduct, art. 5.3. 54  See Solicitors Regulation Authority (SRA) Code of Conduct, Rule R.15 (providing the rules regarding overseas practice, ranging from conflicts of laws to fee practices). 55  The SRA’s new Code adopts an ‘outcome-focused’ approach to ethical regulation. According to the SRA, this new outcome-focused approach concentrates on the high-level principles and outcomes that should drive the provision of legal services for consumers. It replaces a detailed and prescriptive rulebook with a targeted, risk-based approach concentrating on the standards of service to consumers. There is greater flexibility for firms in how they achieve outcomes (standards of service) for clients. See ‘Outcomes-Focused Regulation’, . 56  Solicitors Regulation Authority, Code of Conduct (2011), Chapter 15 (definition of ‘Overseas practice’). 50 51

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National differences in ethical rules taken up separately by the SRA in an effort to regulate ‘international practice’ (as distinct from ‘overseas practice’).57 These various but limited efforts at developing choice-of-law rules to determine which 3.29 national ethical rules will apply in international proceedings demonstrate the limitations of a choice-of-law approach. Although some scholars have suggested that the conflicts, described in detail later, could be resolved through choice-of-law rules, developing such rules appears to be an even greater challenge than resolving the conflicts through development of international norms.

B.  National differences in ethical rules It is often said that all professional legal ethics are informed by fundamental, universal norms.58 3.30 While all systems appear to have some ethical commitments in common, the apparent consensus exists at a high level of abstraction. Often, apparent similarities are merely ‘acoustic agreement’. For example, it is true that every system imposes on attorneys a duty of confidentiality.59 The definition of ‘confidentiality’, however, is different in every legal system.60 Similarly, virtually every legal system requires attorneys to be ‘independent’. In using this term, however, some systems are referring primarily to ‘independence from the State’, whereas other systems are referring to ‘independence from clients’.61 This section analyses the most significant conflicting ethical norms that arise in international 3.31 arbitration. While it does not exhaustively catalogue all the differences in national systems, it does attempt to cut through the superficial similarities and identify the most significant differences among systems. It also attempts to present these conflicts in a manner that will allow more systematic analysis later in Chapters 5, 6, and 7. 1.  Witness communication, improper influence, and perjury The paradigmatic example of conflicting national ethical rules in international arbitration is 3.32 pre-testimonial communication with witnesses. The conflict is often distilled into a simple dichotomy: civil law systems generally prohibit pre-testimonial communication; common law systems generally permit such communication. While superficially accurate, this description is ultimately misleading in its simplicity.62 57  See (providing an overview of work by the SRA to resolve questions related to regulation of overseas practice and inviting commentary). 58  Thomas Lund, Professional Ethics (1970) 18 (‘Despite differences in legal systems, legal practices and procedures and legal customs, lawyers in many countries throughout the world have laid down for themselves substantially the same standards of legal ethics . . .’); see also David Luban, The Sources of Legal Ethics, 48 Rabels Zeitschrift für Ausländisches und Internationales Privatrecht 246, 264–7 (1984) (concluding that German and American ethical rules are essentially similar). 59  See Geoffrey C. Hazard, Jr, ‘An Historical Perspective on the Attorney-Client Privilege’, 66 Cal. L. Rev. 1061 (1978). 60  See paras 3.64–3.69. 61  See Chapter 7. 62  Scholars and commentators often divide the world into systems deriving from the ‘common law’ and ‘civil law’ traditions. While a useful heuristic, these terms are very rough generalizations, which operate more as ‘ideal types’ (to borrow Mirjan Damaska’s terminology) than nuanced descriptions of actual, existing legal systems. Mirjan R. Damaska, The Faces of Justice and State Authority (1986) 4 n. 4. These categories can be misleading, however, because they suggest a degree of uniformity within each tradition that is not often present, and they fail

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Attorneys, Barbarians, and Guerrillas 3.33 It is true that some systems from the so-called ‘civil law tradition’, such as Belgium, France,

Italy, Switzerland, and Germany, greatly restrict pre-testimonial communication with witnesses in domestic court proceedings and often treat such communication as an ethical violation.63 It is also true that other systems, most strikingly the United States, permit attorneys not only to communicate with witnesses before they testify, but also to ‘coach’ witnesses, including reviewing possible cross-examination questions, rehearsing testimony,64 and suggesting possible wording of testimony.65 According to some sources, US attorneys are even ethically obliged to engage in this practice as part of their duty of competence.66 But this black and white picture hides the many shades of grey that exist with national rules regarding witness communication. a.  Subterranean conflicts

3.34 Even if the boundaries regarding pre-testimonial witness communication seem well

defined, there are many differences that exist below the surface. Among legal systems that are traditionally grouped together either as ‘civil law’ or as ‘common law’, there are significant variations regarding what is allowed with regard to pre-testimonial communication. For example, within the so-called civil law tradition, witness ‘coaching’—meaning reviewing and rehearsing testimony with a witness—is apparently permitted in the Netherlands but prohibited in Belgium.67 Meanwhile, among those systems in the Anglo-American

to account for the fact that most systems of the world do not fit neatly into one category or other. In the context of witness communications, most national ethical rules in Latin America do not prohibit pre-testimonial communications, even if those countries are usually characterized as being part of the civil law tradition. On the recent spread of ‘mixed’ systems to Latin America, see Máximo Langer, ‘Revolution in Latin American Criminal Procedure: Diffusion of Legal Ideas from the Periphery’, 55 Am. J. Comp. L. 617 (2007). 63  Some of the earliest identifications of this distinction were comparative law scholars, not practitioners. See Damaska, ‘Presentation of Evidence and Factfinding Precision’, 1088–9; John H. Langbein, ‘The German Advantage in Civil Procedure’, 52 U. Chi. L. Rev. 823, 834 (1985) (The German lawyer ‘virtually never [has] out-of-court contact with a witness’, because, under the German rules of ethics, a lawyer ‘may interview witnesses out of court only when it is justified by special circumstances. He has to avoid even the appearance of influencing the witness and is, in principle, not allowed to take written statements.’). See also John H. Langbein, ‘Trashing “The German Advantage” ’, 82 Nw. U. L. Rev. 763, 767 (1988) (noting that the prohibition is not absolute and communication with witnesses is permitted in cases of ‘unusual necessity’). 64  Hamdi & Ibrahim Mango Co. v Fire Ass’n of Phila., 20 F.R.D. 181, 182–3 (S.D.N.Y. 1957) (acknowledging that it is a usual and legitimate practice for ethical and diligent counsel, in preparing their witnesses for either deposition or trial testimony, to confer with each witness before testimony is given); Joseph D. Piorkowski, Jr, Note, ‘Professional Conduct and the Preparation of Witnesses for Trial: Defining the Acceptable Limitations of “Coaching”’, 1 Geo. J. Legal Ethics 389, 390–1 (1987). 65  Restatement (Third) of the Law Governing Lawyers § 116(b) cmt. b (2000). 66  Although not defined in US codes as a formal ethical obligation, several commentators and courts have indicated that failure to prepare a witness can be a breach of the duty of competent representation. See, e.g., Kevin C. McMunigal, ‘Witness Preparation: When Does It Cross the Line?’ 17-FALL Crim. Just. (2002) 48 (citing comment 5 to Model Rule 1.1); David H. Berg, ‘Preparing Witnesses’, 13 No. 2 Litig. 13, 14 (1987) (concluding it is ‘probably unethical to fail to prepare a witness’); D.C. Bar Op. No. 79 (18 Dec. 1979), reprinted in District of Columbia Bar, Code of Professional Responsibility and Opinions of the District of Columbia Bar Legal Ethics Committee (1991) 138, 139 (stating that an attorney who had the opportunity to prepare a witness, but failed to do so, would not be properly fulfilling his or her professional obligations). 67  A 1973 ethical rule limited pre-testimonial communications to special circumstances when clarification was needed. This rule expressly limiting such communication was ‘dropped’ from German ethical rules in 1996, according to one German scholar, ‘probably because there seemed no need for it’ since attorneys know that a ‘judge would take a dim view of the reliability of a witness’ who had had extensive consultations with an attorney. See Hein Kötz, ‘Civil Justice Systems in Europe and the United States’, 13 Duke J. Comp. & Int’l L.

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National differences in ethical rules tradition that generally tolerate pre-testimonial communication, there are also significant differences. As described by one international attorney, ‘An Australian lawyer felt that from his perspective it would be unethical to prepare a witness; a Canadian lawyer said it would be illegal; and an American lawyer’s view was that not to prepare a witness would be malpractice.’68 In the United States, arguably the most permissive nation, legal ethics are regulated at the 3.35 state level and there are differences among state jurisdictions. Many states impose limitations designed to protect the fairness of proceedings,69 such as prohibitions by some courts against lawyers speaking with non-client witnesses during recesses in testimony,70 using certain types of pre-trial coaching that are deemed to be unfair,71 and asking a ‘third person’ to Myspace- or Facebook-friend a deposition witness.72 US rules also impose special obligations that attach when contacting persons who are represented by an attorney, and general prohibitions against contacting former employees who have confidential information.73 Even with regard to former employees who do not necessarily have confidential information, there is also some divergence among states about the extent and limits on such communications.74 Pre-testimonial communication with witnesses, in other words, is a complex issue. As explored in more detail in the pages that follow, it is not a binary problem of categorically permitting or prohibiting it.

61, 66 (2003); Damaska, ‘Presentation of Evidence and Factfinding Precision’, 1088–9. Pre-testimonial communication with witnesses is permitted in some special circumstances. See John H. Langbein, ‘The German Advantage in Civil Procedure’, 834; Langbein, ‘Trashing “The German Advantage”’, 767. 68  K.L.K. Miller, ‘Zip to Nil?: A Comparison of American and English Lawyers’ Standards of Professional Conduct’, CA32 ALI-ABA 199, 199–223, 204 (1995). 69  John W. Allen, ‘Emerging from the Horse Shed and Still Passing the Smell Test-Ethics of Witness Preparation and Testimony’, 32 SUM Brief 56 (2003); Bennett L. Gershman, ‘Witness Coaching by Prosecutors’, 23 Cardozo L. Rev. 829, 859–62 (2002); Joseph D. Piorkowski, Jr, Note, ‘Professional Conduct and the Preparation of Witnesses for Trial: Defining the Acceptable Limitations of “Coaching”’, 1 Geo. J. Legal Ethics 389, 390–1 (1987) (describing an attorney’s goals during witness preparation as to aid the witness telling the truth and organizing the facts, to introduce the witness to the legal process, to instil the witness with self-confidence, to eliminate opinion and conjecture from the testimony, to make the witness understand the importance of his or her testimony, and to teach the witness to fight anxiety against cross-examination). 70  Charles F. Wolfram, Modern Legal Ethics (1986) § 12.4.3, 648–9. 71  Gershman, ‘Witness Coaching by Prosecutors’ 859–62. 72  Phila. Bar Ass’n Prof ’l Guidance Comm. Op. 2009-02 (March 2009), (holding that a lawyer could not ask a ‘third person’ (presumably a paralegal or office employee) to Facebookfriend a deposition witness). 73  Model Rules of Prof ’l Conduct, R. 4.2 (2004); DC Bar Opinion 287: ‘Ex Parte Contact with Former Employees of Party-Opponents’, ; Habib Hasrullah and Carolyn J. Fairless, ‘Interviews with Former Employees: Strategies and Pitfalls’, 16 No. 2 Prac. Litigator 47 (2005). 74  Compare Va. Rules of Prof ’l Conduct, R. 4.2, cmt. 7 (permitting attorneys to communicate ex parte with former employees or agents even if they were a member of the organization’s ‘control group’) with DC Bar Opinion 287: ‘Ex Parte Contact with Former Employees of Party-Opponents’, (permitting lawyers to contact unrepresented former employees of a party-opponent without obtaining consent from that party so long as prior to the communication the lawyer discloses the lawyer’s identity and the fact that the lawyer represents a party adverse to the ex-employee’s former employer).

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Attorneys, Barbarians, and Guerrillas b.  An elusive international consensus 3.36 Despite some differences in national approaches, the international arbitration community

appears to have developed consensus on the issue of pre-testimonial communication. The consensus is reflected in the 2010 IBA Rules on the Taking of Evidence in International Commercial Arbitration (IBA Evidence Rules). Article 4(3) provided that ‘[i]‌t shall not be improper for a Party, its officers, employees, legal advisors or other representatives to interview its witnesses or potential witnesses and to discuss their prospective testimony with them’.75 Even if it seems like a great equalizer, the negative construction of Article 4(3) (‘It shall not be improper . . .’) reveals that this language is not an affirmative rule. Instead, it is an attempt to remove a prohibition that functioned as an artificially low ceiling for some counsels’ ability to communicate with witnesses. As will be seen in the discussion that follows, however, it does not necessarily create an even floor or a level playing field.

3.37 Simply removing (or attempting to remove) national prohibitions against pre-testimonial

contact leaves open several important questions about witness communication.76 This ambiguity is implicitly acknowledged in the 2010 revisions to Article 4(3), which supplemented previous language that permitted ‘interviews’ to also allow for ‘discuss[ion] of potential testimony’. This seemingly broader permission is still too vague to resolve some of the most difficult questions. Does this permission to engage in ‘interviews’ or ‘discuss potential testimony’ also allow ‘preparation’ of witnesses and ‘rehearsal’ of witness testimony?77 Does it permit contact with former employees of an opposing party, or with individuals who hold confidential information about the opposing party? 78 What are the obligations of counsel when a witness they prepared then commits perjury? Are there limits to witness interviews if a witness is represented by counsel? Is it permissible to compensate a witness for time spent interviewing, preparing, and testifying? A poll of Continental practitioners would likely generate different answers to these questions than a poll of US lawyers. Indeed, one well-known Belgian arbitrator who is clearly aware of Article 4(3) and prevailing trends, still considers it ‘a daring step’ for Continental practitioners to prepare their own client’s witnesses, and ‘beyond . . . imagination’ and such ‘flagrant misbehaviour’ to contact an opposing party’s witnesses.79

3.38 The continued divergence of opinions regarding the nature and extent of permissible com-

munication with witnesses exists because the issue is mistakenly treated as a simple binary problem, which elides the extent of differences between systems. Civil law systems that

75  IBA Rules Taking Evid. Int’l Arb., art. 4(3) (29 May 2010) (IBA R. Evid.). Although it is designated to be a rule of evidence, its use of the word ‘improper’ reveals that it is effectively a rule aimed at finessing the ethical issue. The inter-relationship between procedures and ethics is an important part of the larger story, and will be addressed in Chapter 7. 76  Lucy Reed and Jonathan Sutcliffe, ‘The “Americanization” of International Arbitration?’ 16-4 Mealey’s Int’l Arb. Rpt. 11 (2001) (suggesting that while some consensus has emerged about the possibility of preliminary communication with witnesses, there remains conflict as to the extent permitted). 77  In the United States, while the US has the most permissive rules, witness preparation or ‘coaching’ is subject to serious critiques within the US system. See Roberta K. Flowers, ‘Witness Preparation: Regulating the Profession’s “Dirty Little Secret”’, 38 Hastings Const. L.Q. 1007 (2011). 78  While US attorneys have wide latitude to interview witnesses, there are some important limitations, particularly with respect to former employees who may have confidential information. See Habib Hasrullah and Carolyn J. Fairless, ‘Interviews with Former Employees: Strategies and Pitfalls’, 16 No. 2 Prac. Litigator 47 (2005); DC Bar Opinion 287: ‘Ex Parte Contact with Former Employees of Party-Opponents’, . See also James Castello and Catherine Rogers, ‘Q&A: Is Arbitration an Ethical Wasteland?’ Global Arb. Rev. (17 June 2009). 79  Van Houtte, ‘Counsel-Witness Relations’ 460.

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National differences in ethical rules categorically ban pre-testimonial communication in domestic proceedings do not need, and therefore have not promulgated, rules regarding various sub-issues defining the limits of pre-testimonial communication once it is allowed. Removing civil law prohibitions, in other words, leaves too much open. c. Choice-of-law Assuming that Article 4(3) of the IBA Evidence Rules is a step in the right direction, it is a 3.39 step that may trip up some lawyers. Ethical rules are generally regarded as mandatory rules, meaning that they cannot be displaced by an agreement. They also cannot be displaced by non-binding evidentiary rules promulgated by a voluntary international trade organization, such as the IBA.80 To be effective, international ethical rules purporting to authorize attorneys to engage in conduct that is not permitted by their local ethical rules cannot effectively authorize that conduct in the absence of a choice-of-law mechanism that is adopted by their local bar authorities. Problems at the International Criminal Tribunal for the Former Yugoslavia (the ICTY), 3.40 which faced similar problems with pre-testimonial communications, illustrate this point. The ICTY through its Registrar formally enacted a code of conduct that applies to all defence counsel who appear before it.81 The ICTY is a public international tribunal established by a statute of the United Nations.82 Despite the public nature of the ICTY, in the absence of express authorization from national professional regulatory authorities, these attorneys do not regard their local ethical rules as superseded or displaced by the ICTY Code.83 Accordingly, even though they are permitted under the ICTY Code of ethics to engage in pre-testimonial communication, attorneys from various former-Soviet States will not. The ITCY works around this problem ‘by providing two or more defence counsel who can assign tasks among themselves based on their home jurisdiction rules’.84 International arbitration practitioners appear to be, in general, more pragmatic and perhaps 3.41 more daring than the defence counsel at the ICTY. Instead of waiting for a top-down solution, international arbitration practitioners developed a bottom-up general consensus that was distilled into Article 4(3) of the IBA Evidence Rules. Like the ICTY, however, the solution in Article 4(3) on its own does not necessarily excuse counsel from local ethical prohibitions. In several jurisdictions, international arbitration practitioners have accomplished what 3.42 ICTY defence counsel have not—they have garnered special exemptions from local ethical rules for attorneys in international proceedings. In Switzerland, for example, Article 7 80  Even the International Law Association Code (discussed in Chapter 1) cannot trump national ethical rules absent a domestic choice-of-law rule that authorizes such displacement. 81  See Code of Professional Conduct for Counsel Appearing Before the International Tribunal (Code of Conduct) (12 June 1997), . 82  See United Nations International Criminal Tribunal for the Former Yugoslavia: About the ICTY, ; United Nations General Assembly Security Council, Seventeenth Annual Report of the International Tribunal for the Prosecution of Persons Responsible for Serious Violations of International Humanitarian Law Committed in the Territory of the Former Yugoslavia since 1991 (30 July 2010), . 83  Judith A. McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals: A Case Study of the ICTY’, 30 B.C. Int’l & Comp. L. Rev. 139, 142 (2007). 84  See McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals’ 142–43 (2007) (describing how legal education, malpractice standards, market and informal social controls, and applicable mechanisms of self-regulation shape the ethical obligations of attorneys in domestic contexts).

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Attorneys, Barbarians, and Guerrillas of the Code Suisse de Deontologie provides with respect to contact avec les témoins (contact with witnesses): ‘L’avocat s’abstient d’influencer les témoins et experts. Demeurent reservée les règles particulières des procédures d’arbitrage et procédures devant les Tribunaux supranationaux.’ Under this provision, attorneys are generally prohibited from ‘influencing’ witnesses and experts, but there is a special exception when such conduct is permitted by procedures of an arbitral or international tribunal. Similarly, a resolution of the Conseil de l’Ordre de Paris permits members of the Paris Bar to prepare witnesses in accordance with ‘applicable rules’ in international arbitration proceedings that are located in France or abroad.85 The Deontological Code of the Brussels Bar similarly provides that the local prohibitions against contacting witnesses do not apply in foreign or transnational arbitration when permitted under the rules governing that arbitration.86 3.43 These provisions are instructive at several levels. First, they suggest that national bar authori-

ties may regard their national ethical rules as applying to conduct before international tribunals. Under this view, attorneys appearing before the ITCY, whose Code of Conduct expressly permits witness communication, would seem to be justified in their concerns about potential consequences for violating their home ethical rules that do not allow such communication.87 Under this view, it would also seem that a more comprehensive choice-of-law regime is necessary to address conflicts regarding other ethical rules beyond pre-testimonial communication.

3.44 These national exemptions also suggest some important lessons for future developments

in legal ethics in international arbitration. They demonstrate that, at least in some jurisdictions, international arbitration practitioners have sufficient influence to effectuate accommodations in local ethical rules. This ability may either be a measure of the stature and influence of the international arbitration community in these jurisdictions, or reflect the willingness of bar authorities to cede at least some control over ethical regulation in international arbitration.88 In practice, for the reasons described in Chapter 1, it is likely to be some combination of the two.89 Either way, the promulgation of these provisions is an important data point since efforts to develop an ethical regime for international arbitration will require support from national bar authorities.90

3.45 One final observation about these provisions is that they excuse compliance with local ethi-

cal rules as long as witness communication is consistent with an international tribunal’s

  See also Bulletin du Bâttonnier n. 9 du 4 Mars 2008.   Van Houtte, ‘Counsel-Witness Relations’ 461 (citing articles 5 and 16.5 and 16.8 of the Deontological Code of the Brussels Bar). 87  In some countries, such as Italy, anecdotal evidence suggests that not all attorneys regard national ethical prohibitions as supplanted by transnational practice in arbitration, even if leading international arbitration practitioners adopt the prevailing international consensus in international publications. M.  Rubino Sammartano, ‘Italy,’ in F.B. Weigand (ed.), Practitioner’s Handbook on International Arbitration (2002). 88  It is possible that the exemptions were considered necessary because there was ambiguity among attorneys and regulators regarding the status of the exemption in relation to local ethical prohibitions. 89  As noted in Chapter 1, international arbitration practitioners are often counted among top legal elites and, separately, bar authorities have generally been willing to take a hands-off approach to regulating attorneys in international arbitrations for various reasons. See Chapter 1. 90  See Chapters 6 and 8. 85 86

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National differences in ethical rules procedural rules. In this sense, these provisions are not really conflict-of-laws rules, which authorize substitution of another ethical rule for the local rule. They are, instead, more like a proverbial Get-Out-of-Jail Free Card. They relieve attorneys from local ethical rules regarding pre-testimonial communications in international proceedings. Because Belgium, Switzerland, and France generally prohibited pre-testimonial communication, they never promulgated other rules regarding the various sub-issues that define the limits of pre-testimonial communication once it is allowed in some form. Meanwhile, the 2006 version of Article 4(3) of IBA Evidence Rules states that it is not 3.46 improper to ‘interview’ witnesses, but provides no guidance regarding what constitutes an ‘interview’, specifically whether an ‘interview’ might also encompass ‘rehearsal’ of testimony or efforts to ‘coach’ or ‘prepare’ a witness. In 2010, Article 4(3) of the IBA Evidence Rules was revised to clarify that it is not improper to ‘discuss [with witnesses] their prospective testimony’. As one commentator notes, however, ‘ “discuss” is a broad concept’.91 Even with the revisions to Article 4(3), remaining ambiguity may simply be a reflection of the continuing disagreement regarding the extent to which communication with witnesses is or should be permitted.92 For these reasons, removing national prohibitions against witness communication elimi- 3.47 nates one of the most obvious forms of conflicting ethics, but leaves in its place a range of more subtle, but potentially disruptive, ethical differences. Perhaps more importantly, these provisions appear to turn the tables. Now, attorneys from Belgium, Switzerland, and France are technically free from any ethical regulation on when and how they communicate with witnesses.93 Meanwhile, US, English, Canadian, and Australian attorneys remain subject to (implicitly or explicitly) national ethical rules governing the nature and extent of witness communications. 2.  Information disclosure and document exchange While witness communication is the hallmark example of conflicting national ethical norms, 3.48 it is part of a larger divide involving numerous other ethical issues. Pre-testimonial witness communication, typical in common law systems, is part of a larger process referred to as ‘disclosure’ or, in the United States, ‘pre-trial discovery’. In common law jurisdictions, this phase of litigation usually includes requests for an exchange of documents.94 In this phase, which is managed principally by the attorneys, each party requests from opposing parties documents that are relevant to the case. The purpose of document exchanges is to aid in the process of developing the party’s theory of the case and establish evidence supporting that theory. Because this process is managed by attorneys, systems whose procedures include information or documentary exchanges impose on attorneys specific ethical obligations to ensure the integrity of the process. One of the basic obligations is to comply with a valid

91  Peter Ashford, ‘Rule Changes Affecting the International Arbitration Community’, 22 Am. Rev. Int’l Arb. 87, 101 (2011). 92  See Van Houtte, ‘Counsel-Witness Relations’ 460. 93  Continued expressions of scepticism from some civil law trained lawyers about US techniques perhaps suggest at least some civilian lawyers feel a continued ethical pull from the traditions of their home ethical rules. See Van Houtte, ‘Counsel-Witness Relations’ 460. 94  In the United States, it can also include Interrogatories (written questions regarding issues in the case) and Requests for Admissions (written requests that the opposing party concede particular issues of fact or law), which the opposing party, usually through counsel, is required to respond to.

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Attorneys, Barbarians, and Guerrillas document request, even if it requires turning over to an adversary documents that are harmful to a party’s case or interests.95 3.49 This obligation is part of a larger duty that attorneys have to ensure that parties comply with

valid document requests. For example, Article IX(15) of the Canadian Code of Professional Conduct requires that a lawyer ‘explain to the client the necessity of making full disclosure of all documents relating to any matter in issue’ and ‘assist the client in fulfilling the obligation to make full disclosure’.96 English procedural rules go further, obliging solicitors ‘to take positive steps to ensure that their clients appreciate . . . not only the duties of disclosure and inspection . . . but also the importance of not destroying documents which might possibly have to be disclosed’ and taking steps to ‘ensure that documents are preserved’.97 In the United States, counsel have been sanctioned for failing to ensure a client’s compliance.98

3.50 These duties are extensive. In some systems, the duty to preserve documents is triggered by a

mere threat of litigation in which disclosure of such documents may be required.99 In recent years, the advent of so-called e-discovery, which involves requests for exchanges of email and electronic documents, have ushered in a host of new ethical issues.100 Similarly, the practice of offshore or outsourced document management, meaning the sub-contracting of document review to legal service providers (in, for example, India),101 has generated myriad new ethical issues relating to compliance, competence, conflicts of interest, and protection of confidential information at outsourcing facilities.102

3.51 Because the practice of exchanging of documents creates a risk of inadvertent disclosure of

privileged documents, systems with such practices also generally impose on attorneys ethical obligations related to inadvertent disclosures. Ethical rules in England, Australia, and Canada all require that an attorney receiving inadvertently produced confidential documents return or destroy the documents, generally prohibit them from using such documents, and sometimes require that the opposing counsel be notified.103 In the United States, where

95   In reality, this ethical obligation is implicit in general obligations. It only becomes identified as an independent obligation when it is viewed in comparison to other systems in which counsel do not have an obligation to produce documents that are contrary to a client’s interests. 96  Canadian Bar Association, Code of Professional Conduct, Art. IX(15). 97  Civil Procedure Rules 1998, Rule 31.10.6 (Eng.). 98  See Play Visions, Inc. v Dollar Tree Stores, Inc., 2011 WL 2292326 (W.D. Wash. 2011) (holding counsel ‘jointly and severally’ liable with his client for discovery sanctions where counsel ‘fail[ed] to assist and guide his client’s production of discovery responses’). 99  See Cache Le Poudre Feeds, LLC v Land O’Lakes, Inc., 244 F.R.D. 614, 621–2 (D. Colo. 2007). In Cache Le Poudre, the court observed that simply issuing an order to retain documents in light of potential litigation is not sufficient to discharge an attorney’s duty. Instead, the court held, ‘[c]‌ounsel retains an on-going responsibility to take appropriate measures to ensure that the client has provided all available information and documents which are responsive to discovery requests’. Cache Le Poudre Feeds, LLC v Land O’Lakes, Inc., 630. 100  For a discussion of these ethical issues in the United States system, see Debra Lyn Bassett, ‘E-Pitfalls: Ethics and E-Discovery’, 36 N. Ky. L. Rev. 449 (2009). 101  See Jayanth K. Krishnan, ‘Outsourcing and the Globalizing Legal Profession’, 48 Wm. & Mary L. Rev. 2189, 2205–12 (2007) (discussing the benefits of outsourcing legal work to India). 102  For an extended analysis of the ethical issues raised in these opinions and more generally in offshoring discovery and litigation document management, see generally, Joshua A. Bachrach, ‘Offshore Outsourcing and Risk Management: Proposing Prospective Limitation of Liability Agreements Under Model Rule 1.8(h)’, 21 Geo. J. Legal Ethics 631 (2008); Mary C. Daly and Carole Silver, ‘Flattening The World of Legal Services? The Ethical and Liability Minefields of Offshoring Legal and Law-Related Services’, 38 Geo. J. Int’l L. 401 (2007). 103  For example, Rules 31.1–31.2 of the Australian Solicitors Conduct Rules state that ‘a solicitor to whom material known or reasonably suspected to be confidential is disclosed . . . must not use the material and must

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National differences in ethical rules ethical rules are imposed at the state level, there is wide variance among jurisdictions regarding whether an attorney receiving confidential information must notify opposing counsel, refrain from reading the information, return the document or refrain from using the document, or some combination of all of these.104 In most other countries, there is no similar pre-trial disclosure process. Instead, each party 3.52 presents to the court those documents in its possession that support its case. Parties are not requested or expected to, and do not, produce documents that are harmful to their case. In certain situations, a party may request that the court order an opposing party to produce a document, but the conditions under which such a request can be made are exceedingly narrow. Normally, a requesting party is required to indicate the author, date, topic, and potentially other details of the document, as well as its relevance to the case. Once this burden has been satisfied and the court orders disclosure, a party and its attorney have little or no discretion. Not surprisingly, in systems following this approach to document disclosure, there are generally no express ethical rules relating directly to the process of document disclosure. Just as there is no need to regulate the details of pre-testimonial witness communication in systems where that practice is categorically prohibited, there is no need to regulate the details of pre-trial exchange of information in systems where that process does not occur. As a result, attorneys from those systems have no express ethical obligations to preserve or produce documents, to guide clients in complying with orders to produce, to produce documents that are harmful to a client’s case, or to respond to inadvertently produced confidential documents. In recent years, document and information exchange has become a more normal practice 3.53 in international arbitration.105 The scope and nature of such exchanges can vary considerably, depending on the identity of the arbitrators, parties, and counsel.106 It is fair to estimate,

. . . return, destroy or delete the material (as appropriate) immediately upon becoming aware that disclosure was inadvertent’, take steps to prevent misuse of the material, and in certain circumstances notify opposing counsel. 104   Compare Fla. Bar Ass’n, Prof ’l Ethics Op. 93-3 (1994) (imposing obligation to notify only); with Colo. Rules of Prof ’l Conduct, R. 4.4(b), (c), cmt. 3; Colo. Bar Ass’n, Formal Ethics Op. 108 (2000) (requiring notice and return of document where inadvertence was known, only notice where inadvertence not known, and refraining from viewing document where sender communicates inadvertence to recipient prior to viewing the document); with D.C. Bar Op. 256: ‘Inadvertent Disclosure of Privileged Material to Opposing Counsel’ (1995), (requiring notice and return, but permitting reading and use); with Phila. Bar Ass’n, Ethics Op. 94-3 (1994) (finding that a lawyer has no duty to return a fax inadvertently sent by opposing counsel); with Md. State bar Ass’n, Op. 2007–09: ‘Ethics of Viewing and/or Using Metadata’ (2007) (not imposing even a duty to notify opposing counsel). See also Model Rules of Prof ’l Conduct, R. 4.4 (2009) (requiring a receiving lawyer to ‘promptly notify’ the sender); Am. Bar Ass’n, Formal Op. 06-440: ‘Unsolicited Receipt of Privileged or Confidential Materials: Withdrawal of Formal Opinion 94–382’ (2006) (requiring that an attorney notify ‘a lawyer who knows or reasonably should know that [a]‌document was inadvertently sent shall promptly notify the sender. The Rule does not require refraining from reviewing the materials or abiding by instructions of sender.’). 105  As Rusty Park explains: ‘American lawyers often appear to their foreign colleagues as asserting a right to shoot first and aim later, asking how they are to prove a claim without the other side’s documents. Continental lawyers reply that evidence should be collected before claims are filed. . . . In international arbitration, the different cultural starting points have produced an accommodation in which truth-seeking will be tempered against the objectives of speed and economy.’ William W. Park, ‘Arbitrators and Accuracy’, 849 PLI/Lit 279 (2011). 106  Bernardo M. Cremades, ‘Overcoming the Clash of Legal Cultures: The Role of Interactive Arbitration’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 147, 161 (suggesting that arbitrators must distinguish the cultural background of parties in order to effectively preside over proceedings to which parties come with differing approaches to pre-testimonial communication with witnesses).

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Attorneys, Barbarians, and Guerrillas however, that current conventional practice in international arbitrations involves more document exchange than would be typically required in a German or French court proceeding.107 Modern international arbitration practice adopts an intermediary position between the different legal traditions. It permits some document exchange, but in a much more limited manner than the massive and open-ended exchanges that are permitted under US procedural rules.108 3.54 While this approach appears to bridge the procedural gap, it creates an ethical gap. As

described previously, document exchange procedures necessarily imply certain ethical obligations for counsel to ensure their proper functioning.109 Civil law-trained lawyers who are unaccustomed to document exchanges, and perhaps still regard them as an anathema, have no inherent ethical orientation regarding compliance or treatment of inadvertently produced confidential documents. As one commentator explains, a ‘Latin American jurist . . . feel[s]‌legitimately proud of retaining those [documents] which in one way or another may harm him’.110 Retaining those documents, however, is regarded by common law-trained attorneys as so egregious that it is as if ‘parties or their counsel . . . commit[ted] perjury or otherwise ma[de] misrepresentations to the arbitrators’.111 Unlike pre-testimonial communication with witnesses, instead of narrowing the ‘cultural divide’, the differing perspectives over attorney obligations regarding document exchange appears to be expanding. In particular, the debate over whether document exchange should include electronic documents has raised the stakes.112 Not surprisingly, therefore, differences over ethical obligations regarding document exchanges have prompted calls for clarification of the matter. 3.  Conflicts of interest

3.55 Another area in which different national ethical standards collide in international arbitral pro-

ceedings is with regard to conflicts of interest.113 In this area, there is the now-familiar common

107  Peter Leaver and Henry Forbes Smith, ‘The British Perspective and Practice of Advocacy’, in Doak Bishop and Edward G. Kehoe, (eds.), The Art of Advocacy in International Arbitration, 2nd edn. (2010) 492 (‘International arbitration often follows an approach by which parties may request production of categories of documents where this [level of disclosure] is proportionate to the case.’); Horacio Grigera Naon, ‘Document Production in International Commercial Arbitration: a Latin American Perspective’, ICC 2006 Special Supplement, 15. 108 Alan Scott Rau and Edward F. Sherman, ‘Tradition and Innovation in International Arbitration Procedure’, 30 Tex. Int’l L.J. 89, 103 (1995) (‘International arbitrators, in their discretion, often order discovery of critical documents, but generally will not allow broad US-style discovery requests.’). 109  See Steven A. Hammond, ‘Spoliation in International Arbitration: Is It Time to Reconsider the “Dirty Wars” of the International Arbitral Process?’ 3:1 Disp. Res. Int’l 10 (2009) (‘[I]‌t is easy to see that the need for dispute resolution systems to protect against the wilful destruction or withholding of evidence springs from the same policies that underlie these universal ethical norms of truthfulness and fairness.’). 110  Bernardo M. Cremedas, ‘Overcoming the Clash of Legal Cultures: The Role of Interactive Arbitration’, 14 J. Arb. Int’l 164, 166 (1998). 111  See, e.g., Hammond, ‘Spoliation in International Arbitration’ 5, 10 (decrying the ‘negligent, reckless or wilful destruction of evidence’ in international arbitration). 112  Compare Michael E. Schneider, ‘A Civil Law Perspective: “Forget E-Discovery”’, in David J. Howell (ed.), Electronic Disclosure in International Arbitration (2008) 13; with David Howell, ‘Developments in Electronic Disclosure in International Arbitration’, Disp. Res. Int’l, 3:2 (2009) (noting that the issue has ‘provoked ­vigorous expression of a wide range of views, from those that believe that the challenge can be usefully met by guidelines, protocols or institutional rule changes to those who believe that existing rules make adequate provision for electronic disclosure and that additional measures are both unnecessary and inappropriate’); Nicholas Tse and Natasha Peter, ‘Confronting the Matrix: Do the IBA Rules Require Amendment to Deal With Challenges Posed by Electronically Stored Information’, 74 Arb. 28 (February 2008); Robert H. Smit and Tyler B. Robinson, ‘E-Disclosure in International Arbitration’, 24 Arb. Int’l 105, 106–9 (2008). 113  This chapter focuses on conflicts of interest for counsel. National conceptions of what constitutes a conflict of interest for counsel inevitably affect conceptions of what constitutes a conflict of interest for an arbitrator, which was discussed previously in Chapter 2.

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National differences in ethical rules law/civil law divide, but American attorneys also once again represent the most extreme rules, which not did fit well with established traditions. US codes regulate a range of activities that might give rise to a conflict of interest, such as accepting client gifts,114 engaging in business dealings with clients,115 and receiving payment for services from another party.116 European codes appear to be silent on such matters, limiting their regulation of conflicts of interest to situations involving dual representation. This omission is likely related to the fact that much attorney regulation in Europe, particularly with regard to conflicts of interest, remains informal. By comparison in France, for example, conflicts of interest have been generally prohibited 3.56 since Saint Louis IX in 1258, but the concept of a ‘conflict of interest’ was only recently given a formal name (conflit d’intêrets).117 According to one scholar, this denomination may simply be a translation of the English term.118 In the deontological rules of the Paris Bar Association, the issue merits only a one-sentence prohibition119 and modern treatises dispose of it in a few pages.120 It derives from the ‘duty of delicacy’,121 which suggests that, at least originally, it may have had more to do with good manners than notions of professional competence. As one commentator describes, in Europe even in recent years ‘conflicts are a matter of ethics, 3.57 not law. Conflicts are a matter of your relationship with your client’; according to another scholar, ‘this difference results from the later development of legal ethics in Europe, but that delay in that development has permitted what may be a better measured response’.122 In light of the more flexible standards in Europe, stringent US rules regarding conflicts of interest are blamed for creating a ‘competitive disadvantage for American-based international law firms’, as well as being more generally out of step with modern large-firm practice.123 That said, the merging of US firms with local firms in Europe, Asia, and South America has resulted in a spread of US conflicts standards to those firms.124

114   While not a model of clarity, Model Rule 1.8 views client gifts with extreme suspicion, reflecting the long-standing scepticism in Anglo-American law of client gifts to attorneys. See Wolfram, Modern Legal Ethics (1986) § 8.12.2, 486. 115   The Disciplinary Rules prohibit lawyers from entering into business transactions with clients in which they have differing interests, unless the client consents after full disclosure. See Wolfram, Modern Legal Ethics, § 8.11.2, 480. Courts have expanded application of the rule to apply even when the lawyer was not performing legal services for the client and to require that the attorney advise the client to seek independent legal advice on the matter. § 8.11.2, 480 and n. 80. 116  Disciplinary Rule 5-107(A) ‘prohibits a lawyer from accepting compensation or anything else of value from a person other than the client for representing a client unless the client gives informed consent’. Wolfram, Modern Legal Ethics, § 8.8.2, 443. 117  John Leubsdorf, Man in His Original Dignity: Legal Ethics in France (2001) 42. 118 Leubsdorf, Man in His Original Dignity 42. 119 ‘Elle stipule qu’aucun avocat ne peut conseiller ou défendre deux parties dont les intérêts pourraient être amenés à s’opposer.’ This provision translates to mean that an attorney is not permitted to counsel or defend two parties whose interests can be opposed to each other (translation of the author). 120 Leubsdorf, Man in His Original Dignity 42 and n. 101. 121 Leubsdorf, Man in His Original Dignity 42. 122  Justin Castillo, ‘International Law Practice in the 1990s: Issues of Law, Policy, and Professional Ethics’, 86 Am. Soc’y Int’l L. Proc. 272, 283 (1992), cited in Mary C. Daly, ‘The Dichotomy Between Standards and Rules: A New Way of Understanding the Differences in Perceptions of Lawyer Codes of Conduct by US and Foreign Lawyers’, 32 Vand. J. Transnat’l L. 1117, 1150 (1999); Leubsdorf, Man in His Original Dignity 42. 123  Eli Wald, ‘Federalizing Legal Ethics, Nationalizing Law Practice, and the Future of the American Legal Profession in a Global Age’, 48 San Diego L. Rev. 489 (2011). 124  See Roger C. Cramton, ‘A Comparative Look at Ethics Rules and Professional Ideologies in a Time of Change’, in John J. Barceló and Roger C. Cramton (eds.), Lawyers’ Practice & Ideals: A Comparative View (1999) 267, 274 (advocating US-type conflicts rules for interdisciplinary firms expanding across national lines).

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Attorneys, Barbarians, and Guerrillas 3.58 The discretion afforded European lawyers in evaluating conflicts of interest125 is exemplified

in the Code of Conduct drafted by the CCBE. Under the CCBE Code, an attorney is forbidden from accepting a new client only if there would be a ‘risk’ of breach of a former client’s confidences or if the lawyer’s knowledge of the former client would give an ‘unfair’ advantage to the new client.126 This formulation appears to leave substantial discretion to the attorney to determine whether confidences can be maintained and/or whether an advantage to a new client would be ‘unfair’. It is easy to imagine that a European attorney could decide that even if two matters are related and adverse, the risk of a breach of confidence and unfairness is low.127

3.59 Even when written rules appear to be textually similar, actual national practices may differ

significantly, making comparison between them more complicated. Two empirical studies evaluated levels of compliance with conflict of interest rules, one focusing on American lawyers and the other on British solicitors. Although both systems have relatively similar and detailed rules regarding conflicts of interest, a comparison of the two studies suggests that textual similarity conceals significant divergences in their application.128 While the studies approached each legal community separately, the inescapable conclusion from a comparison of the two studies is that Americans are, in fact, rather scrupulous in their efforts to comply with conflict rules, even when such careful adherence is contrary to their business interests. English solicitors, on the other hand, apparently routinely disregard what they consider to be obsolescent rules. Various different hypotheses may account for these disparate rates of compliance, including varied enforcement mechanisms, the likelihood of sanctions, client tolerance, conceptions of the possibility of genuine harm, and the like. Whatever the reason, the larger point is that meaningful comparison of ethical rules requires not only a comparison of black-letter texts, but also of how rules are applied and enforced.129

3.60 These conceptual differences in the approach to conflicts of interest translate into the

allowances that different systems make for attorney discretion. In many European systems, there is no rule of imputation.130 By contrast, Australian, Canadian, US, and New Zealand

125  Modern European codes of ethics also remain sparse or silent on many other issues that receive considerable attention in US codes and commentary, such as client gifts and third-party compensation. 126  Charter of Core Principles of the European Legal Profession and Code of Conduct for European Lawyers (CCBE Code) art. 3.2 (2006), . 127  The effect of broad, qualitative standards on discretion is particularly problematic because attorneys must exercise this discretion against their own interest in accepting the representation. In this sense, attorney discretion in evaluating conflicts of interest regarding new clients is similar to arbitrator standards for evaluating potential conflicts and disclosure obligations. For a discussion of the risks associated with open-ended qualitative disclosure standards for arbitrators, see Chapter 8. 128  See Nancy J. Moore, ‘Regulating Law Firm Conflicts in the 21st Century: Implications of the Globalization of Legal Services and the Growth of the “Mega Firm”’, 18 Geo. J. Legal Ethics 521 (2005) (comparing Janine Griffiths-Baker, Serving Two Masters: Conflicts of Interest in the Modern Law Firm (2002) with Susan Shapiro, Tangled Loyalties: Conflict of Interest in Legal Practice (2002)). 129  This observation is consistent with modern comparative law scholarship, which seeks to go beyond ‘phonebook comparisons’ of substantive laws. See Catherine A. Rogers, ‘Gulliver’s Troubled Travels, or The Conundrum of Comparative Law’, 67 Geo. Wash. L. Rev. 159 (1998) (Review Essay); see also Mark C. Suchman and Lauren B. Edelman, ‘Legal Rational Myths: The New Institutionalism and the Law and Society Tradition’, 21 Law & Soc. Inquiry 903, 907 (1996); Mary Ann Glendon, et al., Comparative Legal Traditions, 2nd edn., (1994) 11 (emphasizing the benefits of a functional approach examining law in action). 130  Geoffrey Hazard and Angelo Dondi, Legal Ethics: A Comparative Study (2004) 194.

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National differences in ethical rules rules regarding conflicts of interest also include specific rules that impute the conflicts from one member of a firm to all the other members.131 Imputation of conflicts serves several functions.132 One important effect of imputation is that it reduces the discretion attorneys can exercise in assessing the existence of a conflict.133 The US approach to conflicts of interest has been characterized as compulsively pernickety.134 In the United States, lawyers are disqualified from accepting employment of a new client whenever the interests of the new client and an existing or former client are ‘materially adverse’ and the matters involved are ‘substantially related’. These blanket, objectively defined categories leave little discretion to attorneys in evaluating the relative severity of a potential conflict. Instead, that discretion is placed in the hands of clients, who can waive a potential conflict through written consent. As with differing standards for information exchange and witness communication, the different 3.61 standards regarding conflicts of interest can generate significant disruption in arbitral proceedings. A growing number of prominent recent examples have involved conflicts between counsel and arbitrators. In the International Centre for Settlement of Investment Disputes (ICSID) arbitration Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, shortly before the hearing on the merits, the respondent disclosed that it had retained an English barrister who was a member of the same barristers’ chambers at which the Tribunal’s President was a ‘door tenant’.135 The claimant sought to have the Tribunal disqualify the barrister from the proceedings on the grounds that his presence created a conflict of interest with the President of the Tribunal.136 In another ICSID case, the respondent sought to disqualify opposing

131  See Australian Solicitors’ Conduct Rules, R. 11.1 (2012) (‘A solicitor and a law practice must avoid conflicts between the duties owed to two or more current clients, except where permitted by this Rule.’); Code of Prof ’l Conduct, ch. V, cmt. 15 (2009) (Can.) (for purposes of assessing conflicts of interest, ‘a client “is treated as a client” of the law firm of which the lawyer is a partner or associate, whether or not the lawyer handles the client’s work’); Model Rules of Prof ’l Conduct, R. 1.10(a) (2009) (‘While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practising alone would be prohibited from doing so by Rules 1.7 or 1.9’); Lawyers and Conveyancers Act, R. 6.2 (2008) (N.Z.) (Rules regarding conflicting duties for more than one client apply ‘whenever lawyers who are members of the same practice act for more than one party’.). cf. Solicitors’ Code of Conduct, R. 4 (2011) (UK); Janine Griffiths-Baker and Nancy J. Moore, ‘Regulating Conflicts of Interest in Global Law Firms: Peace in Our Time?’ 80 Fordham L. Rev. 2541, 2552 (2012) (‘The [UK] fee-earner must personally hold confidential information, so there is no imputation within the firm, and the lawyer is required to disclose only information that is “material”. . . . Moreover, even if a fee-earner is in possession of “material” information, he or his firm may continue to act provided that the information could be protected by the use of appropriate safeguards. This may even extend to acting without an affected client’s consent if it would not be possible to obtain such agreement.’). 132  Restatement (Third) of the Law Governing Lawyers § 203 cmt. b (describing the reasons for imputation as related to shared interests and confidential information among members of the same firm, as well as avoiding the difficulties of proving an actual conflict). 133  There are legitimate questions of whether particularly the US approach to imputation is too broad, particularly in a market dominated by mega law firms and in which attorneys change firms quite frequently. See Eli Wald, ‘Lawyer Mobility and Legal Ethics: Resolving the Tension Between Confidentiality Requirements and Contemporary Lawyers’ Career Paths’, 31 J. Legal Prof. 199, 227–8 and 272–7 (2007). 134  John Toulmin, ‘A Worldwide Common Code of Professional Ethics?’, 15 Fordham Int’l L. J. 673, 681 (1991/1992) (‘[T]‌he rules of professional conduct in the United States relating to conflicts of interest and imputed disqualification are among the strictest in the world.’). 135  Hrvatska Elektroprivreda, d.d. v The Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling regarding the participation of David Mildon QC in further stages of the proceedings of 6 May 2008, . A ‘door tenant’ is a barrister or other legal practitioner who has been granted permission to join a set of barristers’ chambers, and therefore be listed on their door, although working from premises outside the chambers themselves. 136  Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, paras 10, 12.

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Attorneys, Barbarians, and Guerrillas counsel based on the fact that he had formerly been an associate partner at the same law firm as a member of the Tribunal.137 3.62 Alleged conflicts of interest are not limited to conflicts with members of the tribunal.

Consider, for example, an arbitration seated in Mexico between a US-Mexican joint venture against the Mexican joint venture partner, where the Mexican party is represented by the same Mexican attorney who formerly represented the joint venture and who continues to represent the Mexican party against the joint venture. Representation in a suit against a former client is generally considered a prohibited, non-waivable conflict of interest under US ethical rules, but would apparently be permitted under Mexican rules. The American party would surely want to enforce its right to conflict-free representation, but can it seek disqualification? Even assuming away the difficult questions of whether arbitrators are competent to disqualify counsel and whether such matters are arbitrable, there are complex questions about what rules should apply and what remedies are available. The Mexican attorney can engage in the representation under Mexican ethical rules, but those rules don’t apply in the arbitration and, the American party would argue, they do not curtail its right to conflict-free representation. If the arbitrators decide that such a conflict could call into question the legitimacy of the proceedings and consequently the potential enforceability of the award, they face the difficult question of whether they can disqualify counsel. While similar situations have arisen in individual arbitrations, there is scant authority or published precedent.

3.63 In another ICSID case, the respondent sought to exclude opposing counsel from proceed-

ings based on an alleged conflict of interest arising from the prior representation of the respondent in a related proceeding. While the power of tribunals to rule on such challenges will be taken up directly in Chapter 6, what is interesting about this final decision is that the Committee concluded that it did not have any ‘deontological responsibilities’ and therefore ‘ha[d]‌no power to rule on an allegation of misconduct under any such professional rules as may apply’.138 While it ultimately determined that there was insufficient evidence to find a real risk of the disclosure of confidential information,139 the interesting feature of the decision is that it felt compelled to rule on the issue to preserve ‘the fair conduct of the proceedings before it’140 and determined that it had the ‘power and obligation to make sure that generally recognized principles relating to conflict of interest and the protection of the confidentiality of information imparted by clients to their lawyers are complied with’.141 4.  Confidentiality and attorney-client privilege

3.64 International arbitration proceedings can also be disrupted by differing conceptions of attor-

neys’ confidentiality obligations. Confidentiality in civil law countries is both broader than and narrower than those of the United States. In most civil law countries, the concept of ‘professional secret’ protects information communicated by a client to an attorney, but 137   The Rompetrol Group N.V. v Romania (ICSID Case No. ARB/06/3), Decision on the Participation of a Counsel (14 January 2010). 138   Fraport Ag Frankfurt Airport Servs. Worldwide v Philippines, ICSID Case No. ARB/03/25, Annulment Proceeding, Decision on Application for Disqualification of Counsel, 18 Sept. 2008, para. 39. 139   Fraport Ag Frankfurt Airport Servs. Worldwide v Philippines, paras 41, 54–55. 140   Fraport Ag Frankfurt Airport Servs. Worldwide v Philippines, paras 38–39. 141  Fraport Ag Frankfurt Airport Servs. Worldwide v Philippines, para. 37 (emphasis added).

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National differences in ethical rules not information communicated from the attorney to the client.142 More problematically, from the US perspective, in many systems in-house attorneys are not regarded as having any obligations of confidentiality,143 and thus do not enjoy the evidentiary privileges and protections that would normally accompany such an obligation. This difference has come as a rude awakening to many US firms doing business in Europe, even ones as large as Microsoft, which was obliged to turn over to the EU Competition Authorities information it had thought was covered by the attorney-client privilege.144 Another important distinction is that civil law attorneys are not obliged to maintain as secret 3.65 information they communicate to clients or communications they have with other attorneys, but they are required to treat as confidential information they learn about their clients from other sources.145 By contrast, the common law notion of confidentiality incorporates both communications from an attorney to a client and from a client to an attorney, but does not extend to information learned from third parties. Systems also diverge in how they limit the obligation of confidentiality when client wrong- 3.66 doing or potential wrongdoing is involved. Even among the ethical codes of the 50 states in the United States, there is significant disagreement about the extent of confidentiality obligations when a client has committed or is planning to commit criminal wrongdoing.146 At an international level, the level of disagreement in this area has been described as the most significant threat to orderly transnational legal practice. After years of studying the differences between national ethical codes, the Consultative 3.67 Committee of the CCBE summarized the problem as follows: While there can be no doubt as to the essential principle of the duty of confidentiality, the Consultative Committee has found that there are significant differences between member countries as to the precise extent of lawyer’s rights and duties. These differences are sometimes very subtle in character especially concerning the rights and duties of a lawyer vis-à-vis his client, the courts in criminal cases and administrative authorities in fiscal cases.147 142   See Laurel S. Terry, ‘An Introduction to the European Community’s Legal Ethics Part I: An Analysis of the CCBE Code of Conduct’, 7 Geo. J. Legal Ethics 1, 28–29, 37 (1993); Carsten R. Eggers and Tobias Trautner, ‘An Exploration of the Difference Between the American Notion of “Attorney-Client Privilege” and the Obligations of “Professional Secrecy” in Germany’, 7 Int’l L. Practicum 23 (1994). 143  Some civil law systems do treat in-house counsel as lawyers, and accordingly impose obligations of confidentiality and make their communications subject to privileges. The European Court of Justice has determined, however, that at European Union level, in-house counsel will only be afforded those privileges recognized by all Member States. See Case C-550/07 P, Akzo Nobel Chem. Ltd. v Eur. Comm’n., 2010 ECR I-08301; Case 155/79, AM & S Eur. Ltd. v Comm’n, 1982 ECR 01575; David S. Jones, ‘The Privilege Stops at the Border, Even If A Communication Keeps Going’, 8 S.C.J. Int’l L. & Bus. 297 (2012). Since not all Member States treat in-house counsel as attorneys, none can claim the privilege in proceedings at the European Union level. 144  Triplett Mackintosh and Kristen M. Angus, ‘Conflict in Confidentiality: How E.U. Laws Leave In-House Counsel Outside the Privilege’, 38 Int’l Law. 35 (2004). 145  Eggers and Trautner, ‘An Exploration of the Difference Between the American Notion of “AttorneyClient Privilege” and the Obligations of “Professional Secrecy” in Germany’ 23. 146  Take, for example, a lawyer who is licensed in both New Jersey and the District of Columbia and who discovers that a client has committed or intends to commit fraud. See Malini Majumdar, ‘Ethics in the International Arena: The Need for Clarification’, 8 Geo. J. Legal Ethics 439, 440 (1995). Under the rules of the District of Columbia, our hapless attorney is required to remain silent, while the rules of New Jersey compel him or her to reveal the client’s fraud. The choice-of-law provisions in Model Rule 8.5 attempt to resolve the problem, but even with regard to domestic practice, its solution has been called unsatisfactory and has prompted calls for national ethical rules that will apply in all jurisdictions. See Mary C. Daly, ‘Resolving Ethical Conflicts in Multinational Practice—Is Model Rule 8.5 the Answer, an Answer or No Answer at All?’ 36 S. Tex. L. Rev. 715, 720 (1995). 147  See Consultative Committee of the Bars and Law Societies of the European Community, ‘The Declaration of Perugia on the Principles of Professional Conduct of the Bars and Law Societies of the

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Attorneys, Barbarians, and Guerrillas In making the CCBE Code, European regulators have identified the problem, but not made any real progress toward resolving it. The CCBE Code fails to acknowledge explicitly that there is a tension between obligations to disclose wrongdoing and obligations to maintain client secrets, let alone to acknowledge that systems resolve the tension differently.148 3.68 Apart from the variances in the duty to maintain client confidences, many systems impose

on attorneys other confidentiality requirements that either do not exist or are in tension with other ethical obligations in different systems. For instance, in many Continental civil law systems, such as Italy, France, and Portugal (though not Germany), as well as the United Kingdom, communications between opposing counsel can be regarded as confidential.149 Upon receiving a communication marked ‘confidential’, or in French ‘sous la foi du Palais’, the receiving attorney must maintain the communication as confidential and is even prohibited from sending copies to his or her own client.150 In the United States, treating as confidential communications from opposing counsel could conflict with an attorney’s obligations to keep clients informed, particularly if the communication involved refers to a potential settlement.

3.69 It is easy to foresee how such different rules could play out in an international arbitration. In

one actual and possibly typical example, British counsel sent its American opposing counsel a ‘Confidential’ letter that contained an admission regarding a fact otherwise difficult to prove. When the American party cited it to the tribunal in a submission, the British party protested vigorously, calling ethical foul. The American party responded that it did not know about and was not bound by the British ethical rule. The cold reality is that whether such conduct is treated as appropriate or unethical in the arbitral proceedings will depend wholly on who the arbitrators are and what their ad hoc calculus is. In other words, counsel (and their clients) may bear the negative consequences of ex post application of an ethical rule that they did not anticipate and that, if known ex ante, could have been planned for. 5.  Ex parte communications

3.70 The nature and extent of permissible ex parte communications between parties and arbitrators

is another area of significant disagreement and resulting confusion. In most civil law systems, it is not necessarily presumed that both parties will always be present during proceedings with the judge. If, for example, a German attorney arrived at a hearing at which opposing counsel was either absent or late in arriving, it would be considered perfectly appropriate for the judge to discuss with the present attorney various aspects of the case.151 In the United States, the same conduct might well result in a motion to disqualify the judge and an ethics complaint against the lawyer. US judicial and attorney ethics entail almost absolute restrictions against European Community’, 1 (1977), . 148  See Terry, ‘An Introduction to the European Community’s Legal Ethics Part I’ 28–29 (noting that the CCBE Code imposes seemingly inconsistent provisions, which suggest without expressly acknowledging that, although phrased in absolute terms, the obligation of confidentiality may have limits). 149  John Leubsdorf, Man in His Original Dignity: Legal Ethics in France (2001) 20, 23. (‘Even today, the English bar does not require its members to communicate with clients or follow their instructions.’) 150  Terry, ‘An Introduction to the European Community’s Legal Ethics Part I’ 85. 151  See, e.g., Code of Conduct—Germany, § 8.3 (‘A lawyer may contact or submit documents or exhibits to a judge without the knowledge of the lawyer(s) or the opposing client(s) in the case.’), cited in Terry, ‘An Introduction to the European Community’s Legal Ethics Part I’ 36 n. 159, 37–8, and n. 158 (noting that in many European countries ‘ex parte contact with the court on “nonfundamental” issues is not prohibited’).

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National differences in ethical rules ex parte communications, except in very rare procedural contexts.152 Judith Resnik has demonstrated that rigid prohibitions against ex parte communications may be softening as judges are assuming a more ‘managerial’ function in the US system. Even new-fangled practices, however, usually rely on advance, express party consent to the ex parte communications.153 Based on these national judicial practices, it would be reasonable to assume that when 3.71 German and American attorneys are together in international arbitration contexts, it is the American attorneys who studiously avoid ex parte contacts, whereas civilian trained lawyers would demonstrate a greater willingness to engage in such communications. But that is precisely contrary to what has happened, at least historically. In an unexpected counterpunch, notwithstanding the stringent rules prohibiting ex parte communications in US court proceedings, domestic US arbitration rules permit parties to communicate throughout arbitral proceedings with their party-appointed arbitrators, even about crucial issues involving strategy.154 While Chinese and Continental systems tolerate some ex parte communication in adjudication, the approach adopted by US domestic arbitration extends well beyond that level.155 Ex parte communication with arbitrators, because of its obvious potential to disrupt proceedings and taint results, is one area that has attracted a great deal of attention to the lack of ethical regulation for lawyers in international arbitration.156 In yet another apparent about-face, American attorneys have been known to challenge 3.72 ex parte practices in the Chinese arbitration system, where the arbitrator, like the Chinese judge, will act as a mediator in the same case in which the person presides as ultimate arbiter.157

  See, e.g., Wolfram, Modern Legal Ethics § 11.3.3, 605–6.   See Judith Resnik, ‘Managerial Judges’, 96 Harv. L. Rev. 374, 390, 425–7 (1982) (demonstrating and criticizing the modern trend of ‘managerial judging’). 154   Compare Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration (1991) 225–6 (noting that ‘it is not unusual for there to be discussions with just one of the parties in respect of procedural matters such as availability for future hearings’), and Code of Ethics for Arbitrators in Commercial Disputes, Canons III(B)(I) (American Arbitration Ass’n, 1977) (permitting ex parte communications with any member of the arbitral tribunal ‘concerning such matters as setting the time and place of hearings or making other arrangements for the conduct of the proceedings’), and Code of Ethics for Arbitrators in Commercial Disputes, Canon VII (permitting ex parte communications by party-appointed arbitrators as long as general disclosure is made), with Rules of Ethics, R. 5.3 (International Bar Ass’n, 2001) (prohibiting ‘any unilateral communications regarding the case’). For extended discussion of these rules, see W. Lawrence Craig et al., International Chamber of Commerce Arbitration, 3rd edn. (2000) § 13.07; M. Scott Donahey, ‘The Independence and Neutrality of Arbitrators’, 9(4) J. Int’l Arb. 31, 41–2 (1992). 155  See, e.g., Lifecare Int’l, Inc. v CD Med., Inc., 68 F.3d 429 (11th Cir. 1995); Sunkist Soft Drinks, Inc. v Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993) (finding no misconduct despite finding that party arbitrator met with representatives and witnesses of appointing party before arbitration to plan strategy). These cases involved domestic US arbitrations, which means that these objections did not arise because of conflicting cultural perspectives on ex parte communication, but were challenges to the inherent fairness of proceedings when parties are communicating with arbitrators. 156  Detlev Vagts, ‘International Legal Ethics and Professional Responsibility’, 92 Am. Soc. Int’l L. Proc. 378, 379 (1998) (reporting a panel discussion of a hypothetical case involving European and American lawyers in an arbitration in Geneva that was governed by Swiss law); Ambassador Malcolm Wilkey, ‘The Practicalities of Cross-Cultural Arbitration’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 79, 86 (describing differing approaches to ex parte communication as a problem in international arbitration that must be overcome). 157  Jun Ge, ‘Mediation, Arbitration and Litigation: Dispute Resolution in the People’s Republic of China’, 15 UCLA Pac. Basin L.J. 122, 127 (1996) (noting that the Chinese Civil Procedure Law requires judges to conduct mediation if the parties do not object). This approach translates into arbitration rules in China and other Asian countries. See Philip J. McConnaughay, ‘Rethinking the Role of Law and Contracts in East-West Commercial Relationships’, 41 Va. J. Int’l L. 427, 452 n. 102 (2001). 152 153

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Attorneys, Barbarians, and Guerrillas Under this practice, the Chinese judge-turned-mediator elicits information from the parties in what—from an American perspective—are improper ex parte conversations. The substance of these ex parte conversations may be (but is not necessarily) communicated to other parties, and ‘[i]‌f mediation fails and the court elects to try the case, it may without further investigation rely solely on the information acquired by the judge while he acted as a mediator’.158 As one American commentator explains, these ex parte mediation efforts create a risk that ‘the arbitrators may become biased or even corrupted . . .’.159 Another commentator described the conflict in even more stark terms: [The] role [of a mediator is] fundamentally repugnant to, and inconsistent with, that ascribed by law to the traditional Anglo-Australian arbitrator . . . [For the same individual to serve both as mediator, and then, if unsuccessful, as arbitrator is] fundamentally contrary to the requirements of natural justice.160

This complaint may seem somewhat ironic to those who have been stunned by historical American ex parte excesses. Despite the fact that US practices have changed and presumptively preclude ex parte communications, many questions remain regarding the proper limits of ex parte communications in international arbitrations, particularly regarding the arbitrator selection process, as described in Chapter 2. 6.  Creativity, aggression, and bad manners 3.73 For all the differences in specific ethical rules, the clashes most complained about by par-

ticipants and commentators are usually referred to as a conflict between professional ‘styles’ or legal cultures, rather than professional ethics. American attorneys are often accused of interjecting excessive objections, bullying witnesses on cross-examination, concocting creative interpretations of legal rules, and strategically jockeying for procedural advantages. To their European counterparts, the American approach to arbitration as ‘total warfare’161 is disruptive and counterproductive. American attorneys are often regarded as ‘ungentlemanly’ if not barbaric.162

3.74 As Catherine Fox, general counsel for Alcatel Space Industries in France, complained, in

one arbitration an American attorney ‘constantly [said] “objection, objection, objection.” Finally the Swiss president had to remind him he wasn’t in a US court.’163 This conduct by Americans has led to a perceptible souring of in-house counsel to international arbitration generally.164 It is worth noting, however, that while European arbitration specialists are

158 Stanley B. Lubman, ‘Dispute Resolution in China After Deng Xiaoping: “Mao and Mediation” Revisited’, 11 Colum. J. Asian L. 229, 337 (1997) (quoted in Philip J. McConnaughay, ‘Rethinking the Role of Law and Contracts in East-West Commercial Relationships’, 41 Va. J. Int’l L. 427 n. 102 (2001)). 159  Randall Peerenboom, ‘The Evolving Regulatory Framework for Enforcement of Arbitral Awards in the People’s Republic of China’, 1 Asian-Pac. L. & Pol’y J. 12, 23 (2000). 160  J.D. Fine, ‘Continuum or Chasm?: Can West Meet East?’ 6(4) J. Int’l Arb. 27, 30 (1989) (quoted in Philip J. McConnaughay, ‘Rethinking the Role of Law and Contracts in East-West Commercial Relationships’, 41 Va. J. Int’l L. 427, 452 n. 103 (2001)). 161  See Nicolas C. Ulmer, ‘A Comment on “The ‘Americanization’ of International Arbitration?”  ’ 16-6 Mealey’s Int’l Arb. Rep. 19, 24 (2001) (quoting Stephen R. Bond, ‘Meeting the Challenges of a Changing World’, 3(3) J. Int’l Arb. 5, 6 (1986)). 162  See Ulmer, ‘A Comment on “The ‘Americanization’ of International Arbitration?” ’ 19, 24. 163  Rob Vosper, ‘Arbitration Anguish: European In-House Counsel Find Fault in International Commercial Arbitrations’, Inside Counsel, 5 May 2006, . 164  See Vosper, ‘Arbitration Anguish’ 1.

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National differences in ethical rules frustrated with American excesses, they too are subject to criticism from Asian parties and attorneys for treating commercial disputes as a ‘zero-sum game’165 and being brazenly inflexible in negotiation and mediation processes.166 These differences are usually considered to be matters of ‘style’ rather than questions of 3.75 ethics. But local and national ethical rules are intimately related to, and establish the outer boundaries of, professional styles. Zealousness is considered a professional virtue and even an ethical obligation in the United States.167 Vigorous cross-examination is not only regarded as an ethical obligation, but often elevated as a lawyer’s highest ethical duty.168 Similarly, with creative argumentation, under the Model Rules of Professional Conduct,169 American attorneys are permitted ‘to urge any possible construction of the law favorable to his client, without regard to his professional opinion as to the likelihood that the construction will ultimately prevail.’ This ethically sanctioned room for creativity is bounded only by strategic considerations and the stricture against wholly frivolous arguments in Federal Rule of Civil Procedure 11.170 In Continental systems, as well as England, a similar degree of creativity would be con- 3.76 sidered professionally irresponsible, if not unethical. Zealousness is also regarded, not as a professional virtue, but as ‘unbridled and ungentlemanly aggressivity and excess’ by foreign attorneys.171 Rather than zealousness, ethical values in systems other than the US usually emphasize the exercise of restraint and independent professional judgment. In an extreme example, English barristers are, and (until recently) attorneys in some civil law countries were, forbidden from forming law firms for fear that a partner’s independent judgment could be stifled by those of other partners. The same argument was the justification for not allowing attorneys employed as in-house counsel to be considered practising members of the bar—it would be impossible to remain professionally independent of a client who directly employs you.172 This insistence on professional detachment also explains why most Continental and other legal systems ethically prohibit contingency fee representation.173

  Fine, ‘Continuum or Chasm?’ 27, 32.   Fine, ‘Continuum or Chasm?’ 34. 167  John Burkoff, ‘Criminal Defense Ethics: Scope of Representation: Zealousness and Overzealousness’, Criminal Defense Ethics, 2nd edn. (2002) § 5:2. 168  Tom Lininger, ‘Bearing the Cross’, 74 Fordham L. Rev. 1353, 1353 (2005). 169  The Model Rules of Professional Conduct are a set of model rules promulgated and revised by the American Bar Association. The regulatory authorities of individual states implement and enforce these rules. 170  Federal Rule of Civil Procedure 11(b) forces attorneys to certify that all claims, defences, and other legal contentions are warranted by existing law or by a ‘nonfrivolous argument’. Georgene Vairo, ‘Rule 11 and the Profession’, 67 Fordham L. Rev. 589, 600 (1998) (showing how circuit courts have relied upon Rule 11 to attack unprofessional conduct); American Judicature Society, S. Burbank (ed.), Report of the Third Circuit Task Force on Federal Rule of Civil Procedure (1989) 11 75–77 (citing successes of Rule 11 in curbing frivolous filings in the Third Circuit); Thomas E. Willging, ‘The Rule 11 Sanctioning Process’, Federal Judicial Ctr., 174–5, (1988) (concluding Rule 11 changed the role of the attorney by establishing a threshold obligation to determine a factual basis and a plausible, arguable legal theory before proceeding). 171  Ulmer, ‘A Comment on “The ‘Americanization’ of International Arbitration?” ’ 19. 172  This rule applies in four EC Member States: Italy, France, Belgium, and Luxembourg. Sally R. Weaver, ‘Client Confidences in Disputes Between In-House Attorneys and Their Employer-Clients: Much Ado About Nothing—Or Something?’ 30 U.C. Davis L. Rev. 483, 527 (1997). 173  Virginia G. Maurer et al., ‘Attorney Fee Arrangements: The US and Western European Perspectives’, 19 Nw. J. Int’l L. & Bus. 272, 320 (1999). 165 166

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Attorneys, Barbarians, and Guerrillas 3.77 These ethical prescriptions translate into professional protocols or styles, which often collide

in international arbitration. As Doak Bishop explains, a typical compliment from a British judge may be that he acted ‘admirably understated, as usual’.174 To an attorney or arbitrator trained in that system, an American attorney’s zeal during international arbitration proceedings would seem unseemly and improper. Similarly, an American attorney zealously ‘attempting to obtain perceived procedural advantages might [be] viewed as unreasonable partly because it asks the arbitrator to rule in a manner inconsistent with the arbitrator’s duty to treat the parties fairly and equally’.175 The ‘unreasonableness’ of the request will likely not result in an adverse ruling on the immediate issue, but perhaps a deeper scepticism about the attorney’s professional ethics, even though the offending conduct was inspired by the paramount American ethical virtue of loyal zeal for the client.

3.78 One important area in which US courts are imposing stricter limits on zealousness and crea-

tivity is with respect to challenges to arbitral awards. US courts are demonstrating increased willingness to sanction parties and counsel for bringing what are deemed to be frivolous challenges to arbitral awards.176 7.  Attorney fees

3.79 A final ethical issue of growing importance in international arbitration relates to how par-

ties compensate their attorneys and pay for the costs of bringing their claims. This section addresses briefly the issue of contingency fee claims, and Chapter 5 takes up both contingency fees and funding by third parties allowing a party who believes it has a meritorious claim, but has insufficient funds to pursue that claim, to assert its rights by financing claims outside the traditional pay-as-you-go model for hourly attorney fees.177

3.80 Different legal systems have starkly disparate views on contingency fee arrangements (or

‘conditional fees’, as they are known in some jurisdictions). Most of the world has traditionally opposed such fee agreements. This is perhaps why the CCBE Code specifically prohibits contingency fees (pactum de quota litis).178 Within the EU, most jurisdictions have remained steadfast in their opposition to contingency fees.179 Many other jurisdictions, such as Uganda,180 also strictly prohibit contingency fees and fee-splitting. Opponents of contingency fees claim the fees create perverse incentives for attorneys to act over-litigiously, overcharge, and act contrary to client interests.181

  Doak Bishop (ed.), The Art Of Advocacy in International Arbitration (Juris Publishing, Inc., 2004) 445.   Bishop, (ed.), The Art Of Advocacy in International Arbitration 444. 176  B.L. Harbert Int’l v Hercules Steel Co., 441 F.3d 905, 913-14 (11th Cir. 2006), overruled on other grounds (holding that courts must ‘ensure arbitration is an alternative to litigation, not an additional layer in a protracted contest’, the court stated that it was ‘ready, willing, and able to consider imposing sanctions in appropriate cases’); see also World Business Paradise, Inc. v Suntrust Bank, 403 Fed. Appx. 468 (11th Cir. 2010). 177  Lawrence S. Schaner and Thomas G. Appleman, ‘The Rise of 3rd-Party Litigation Funding’, Law 360, 21 Jan. 2011, . 178  CCBE Code of Conduct for European Lawyers, R 3.3.1 (2010) (‘A lawyer shall not be entitled to make a pactum de quota litis.’). 179  Michael G. Faure et al., ‘No Cure, No Pay and Contingency Fees’, in Mark Tuil and Louis Visscher (eds.), New Trends in Financing Civil Litigation in Europe: A Legal, Empirical, and Economic Analysis (2010) 33, 33–6. 180  See The Advocates Act, The Advocates (Professional Conduct Regulations), reg. 26 (Uganda). 181  See Lester Brickman, ‘Contingency Fees Without Contingencies: Hamlet Without the Prince of Denmark?’ 37 UCLA L. Rev. 29, 32 (1989); Kevin M. Clermont and John D. Currivan, ‘Improving on the Contingent Fee’, 63 Cornell L. Rev. 529, 532 (1978). 174 175

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National differences in ethical rules In other countries contingency fees are generally permitted. In the US, in particular, reason- 3.81 able contingent fee arrangements have been generally valid, except in family and criminal cases.182 In South Korea, contingent fee arrangements are similarly common, even in family and criminal cases.183 And contingent-like fees have been permitted, though very limitedly, in other countries such as Australia, Canada, Denmark, France, Ireland, Japan, New Zealand, Portugal, Scotland, and Thailand.184 Proponents of contingency fees argue that, due to the high initial cost of bringing certain 3.82 types of lawsuits (such as personal injury), contingent fees allow the less financially advantaged an opportunity to obtain justice.185 Recently, many States traditionally opposed to contingent arrangements have been loosening their restrictions. For one, in 2008, the German parliament passed an amendment to the Federal Lawyers’ Act authorizing lawyers and their clients to agree on contingency fees in specific situations.186 Similarly, South Africa, England and Wales, and Spain187 have abolished prohibitions within the past 15 years. Though contingency fees are traditionally used in tort and employment cases,188 their use 3.83 by commercial organizations in international commercial disputes has grown in recent years, particularly investment arbitration.189 In enforcement of foreign judgments, some jurisdictions have historically refused to enforce judgments that were procured through

182   See Model Rules of Prof ’l Conduct, R. 1.5(d) (2009). See also F.D.I.C. v Bender, 127 F.3d 58 (D.C. Cir. 1997) (contingent fee agreements in District of Columbia are entirely permissible as long as they meet certain requirements, and are not invalid for any public policy reason); Cappel v Adams, 434 F.2d 1278, 1280 (5th Cir. 1970) (‘Contingent fee contracts have long been commonly accepted in the United States in civil proceedings to enforce claims’). 183   See Lee, Gyooho, ‘Cost and Fee Allocation Rules in Korean Civil Procedure’, 10 J. Korean L. 65, 85 (2010). In 2007, the Korean legislature rejected a bill that would have restricted contingency fees in criminal cases. 184   See Kyung Hwan Baik and In-Gyu Kim, ‘Contingent Fees Versus Legal Expenses Insurance’, 27 Int’l Rev. L. & Econ. 351, 352 n. 1 (2007); W. Kent Davis, ‘The International View of Attorney Fees in Civil Suits: Why Is the United States the “Odd Man Out” in How It Pays Its Lawyers?’ 16 Ariz. J. Int’l & Comp. L. 361, 383 (1999). 185  See, e.g., Liberty Mut. Ins. Co. v Ameta & Co., 564 F.2d 1097, 1105 (4th Cir. 1977) (‘[S]‌ound public policy favor[s] the contingent fee as a method for those less financially advantaged to vindicate their substantive rights.’). 186  See Bundesrechtsanwaltsordnung [Federal Lawyers’ Act], 12 June 2011, § 49b(2) (Ger.), ; Gesetz zur Neuregelung des Verbots der Vereinbarung von Erfolgshonoraren [Law Amending the Prohibition of the Agreement of Contingency Fees], 12 June 2008, BGBl. I 1000, ; Gerhard Wagner, ‘Litigation Costs and Their Recovery: The German Experience’, 28 Civ. Just. Q. 367, 378–9 (2009) (‘Contingency fees are permissible if, and only if, the client would otherwise be deterred from asserting his rights due to his financial situation and his attitude towards risk. Like any other agreement on remuneration which derogates from the statutory fee schedule, the agreement of a contingency fee must meet strict formal requirements.’). 187  See Carlos Gómez Ligüerre and Carlos Alb. Ruiz García, ‘Lawyers’ Fees, Competition Law and Contingent Fees’, 1 InDret (2009), (‘[O]‌n November 4th, 2008, the Spanish Supreme Court . . . quashed the prohibition [against contingency fees] under the reasoning that it affected competition by restricting the attorney and its client to freely set the price of the legal assistance and, therefore, imposing indirectly a minimum fee.’). 188  See Rogers, ‘Fit and Function in Legal Ethics’ 366 n. 116. 189  See B.M. Cremades, Jr, ‘Third Party Litigation Funding: Investing in Arbitration’, 8(4) Transnat’l Disp. Mgmt., 2 (2011), .

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Attorneys, Barbarians, and Guerrillas contingency fee arrangements. To date, arbitral awards have been largely impervious to such public policy challenges, except in exceptional circumstances.190

C.  Internationalization and enforcement 3.84 The lack of effective counsel regulation in international arbitration is no longer regarded as a

minor problem that can be ignored. Imporant voices have acknowledged that it is a potential crisis that can threaten the legitimacy of international arbitration.191 The need for systematic analysis and redress is no longer debatable.192 1.  Existing international standards

3.85 The long-standing need for international ethical guidance is evidenced by long-standing

efforts to redress the need with literally dozens of efforts at international codes of ethics. Drafted in 1956 and 1977, respectively, the IBA International Code of Legal Ethics and the CCBE Declaration of Perugia on the Principles of Professional Conduct were among the first.193 Remarkable for their prescience, they are most accurately described as professional notions rather than rules that provide any meaningful guidance.194

3.86 More recent efforts include the IBA ‘Core Values’ Resolution (1998) and the IBA General

Principles of the Legal Profession (2006), for which a new commentary is currently being

190   See Ian Meredith and Sarah Aspinall, ‘Do Alternative Fee Arrangements Have a Place in International Arbitration?’ 72 Arb. 22, 22 (2006). See also Michael D. Goldhaber, ‘How Much is Too Much?’ The American Lawyer, 1 June 2010 (providing an account of the extraordinary arrangements for contingent fees that ended up totalling over 80% of the party’s recovery). 191   Brower and Schill, ‘Regulating Counsel Conduct Before International Arbitral Tribunals’ (‘At issue may ultimately be the legitimacy of the international arbitral system as a whole, in particular inasmuch as . . . [uniform legal ethics for counsel] operate not only retrospectively . . . but also prospectively as a mechanism of global governance.’); see also Cairns, ‘Advocacy and the Functions of Lawyers in International Arbitration’, in M.Á. Fernández-Ballesteros and D. Arias (eds.), Liber Amicorum Bernardo Cremades (2010) 291. 192   See Margaret Moses, Ethics in International Arbitration: Traps for the Unwary (2013) 5–6, ; (‘An international code could help provide transparency and certainty for proper attorney conduct, help level the playing field, contribute to the fairness of the procedure, and improve the confidence of the participants and the public in the arbitration process.’); Address by Doak Bishop at the ICCA Congress on 26 May 2010 (‘Although there have been no catastrophes to this point, the International Arbitration system is at least subject to reasonable criticism without its own transparent Code of Ethics, and we need to ensure the future integrity and legitimacy of the system’.); see also Carolyn B. Lamm et al., ‘Has the Time Come for an ICSID Code of Ethics for Counsel?’ in Karl Sauvant (ed.), 2009–2010 Y.B. Int’l Inv. L. & Pol’y (2010); Cyrus Benson, ‘Can Professional Ethics Wait? The Need for Transparency in International Arbitration’, 3 Disp. Resol. Int’l 78, 83 (2009); Doak Bishop and Margret Stevens, ‘Advocacy and Ethics in International Arbitration: International Code of Ethics for Lawyers Practicing Before International Arbitral Tribunals’, in Albert van den Berg (ed.), Arbitration Advocacy in Changing Times (ICCA Congress Series No. 15, 2010) 408–420; Gunther Horvath, ‘Guerrilla Tactics in Arbitration, An Ethical Battle: Is There Need for a Universal Code of Ethics?’ in C. Klausegger, P. Klein, F. Kremslehner, A. Petsche, and N. Pitkowitz (eds.), Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 297. 193  See Rogers, ‘Fit and Function’, note 17, 396; M. McCary, ‘Bridging Ethical Borders: International Legal Ethics with an Islamic Perspective’, 35 Tex. Int’l L.J. 294 (2000). 194  See The Declaration on the Principles of Professional Conduct of the Bars and Law Societies of the European Community (1977) [Perugia Principles]. The Perugia Principles contained only eight brief ethical pronouncements, which have been described as an obscure ‘discourse on the function of a lawyer in society’ and ‘the nature of the rules of professional conduct’. Mary C. Daly, ‘The Dichotomy Between Standards and Rules: A New Way of Understanding the Differences in Perceptions of Lawyer Codes of Conduct by US and Foreign Lawyers’, 32 Vand. J. Transnat’l L. 1159 (1999).

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Internationalization and enforcement drafted.195 In 2005, the Bar Association Presidents’ Meeting developed a Statement of Core Principles, now adopted by over 100 bar associations around the world. Meanwhile, the Union Internationale des Avocats (UIA) developed the Turin Principles in 2002.196 While all laudable efforts, most operate at a level of abstraction that provides little meaningful guidance to the most salient issues that arise in international arbitral practice.197 Other modern international efforts within Europe have had a more tailored focus. The 3.87 CCBE developed a Code of Conduct (1988; revised in 2006)198 to provide guidance to attorneys engaged in cross-border activities in Europe. While the CCBE Code is arguably the most advanced and successful international code of ethics to date,199 it has little to say about international arbitration practice per se. In another more recent effort, the Study Group of the International Law Association on 3.88 the Practice and Procedure of International Courts and Tribunals published the ILA Hague Principles on Ethical Standards for Counsel appearing Before International Courts and Tribunals (ILA Principles).200 However, the ILA Principles only apply to arbitrations in which one party is a State, meaning they are expressly inapplicable to most international arbitrations. Like the CCBE Code and some of its international predecessors, the ILA Principles deal mostly in abstractions and fail to articulate its own relationship to national ethical rules, particularly when those rules conflict with the ILA Principles.201 The most important effort to date is the Guidelines developed by the IBA’s Task Force on 3.89 the Professional Conduct of Counsel in International Arbitration (IBA Task Force) that was originally constituted in 2008. In 2013, the IBA Task Force finally released its Guidelines for Party Representatives in International Arbitration.202 The Guidelines state explicitly that 195   The ‘Commentary on the General Principles of Conduct for the Legal Profession 2006’ was circulated to all IBA member organizations in June 2010 for consultation. The resulting contributions and suggested amendments were discussed in Vancouver by the BIC Policy Committee, and a further revision is now being made. A first draft was to be submitted to the IBA Council for consideration in May 2011. See IBA, Bar Issues Commission Projects, , 29 June 2011. 196   For a detailed survey of reform efforts to date, see Laurel S. Terry, ‘A “How To” Guide for Incorporating Global and Comparative Perspectives into the Required Professional Responsibility Course’, 51 St. Louis L.J. 1140–6 (2007). 197  For example, the Statement of Core Principles provides such broad admonitions as: ‘An independent legal profession, without which there is no rule of law or freedom for the people.’ While obviously an important principle, absent a meaningful definition of what constitutes ‘independent’ or ‘rule of law’, the general principle provides little meaningful guidance. See H. W. Arthurs, ‘A Global Code of Ethics for the Transnational Legal Field’, Legal Ethics 2, 59 (1999) (discussing the difficulties of creating a universal or global code of ethics and criticizing such codes as ineffective). 198  Charter of Core Principles of the European Legal Profession and Code of Conduct for European Lawyers (2006), [CCBE Code of Conduct], . 199  See Terry, ‘An Introduction to the European Community’s Legal Ethics Part I’ 36–7 (1993). 200 Available at , 21 September 2011. 201  Article 2.4 of the CCBE Code provides: ‘When practising cross-border, a lawyer from another Member State may be bound to comply with the professional rules of the Host Member State. Lawyers have a duty to inform themselves as to the rules which will affect them in the performance of any particular activity.’ CCBE Code of Conduct, art. 2.4. 202  Available at (henceforth ‘Guidelines’). The change in title from the original name of the Task Force (which referenced ‘Counsel Ethics’) is in recognition that not all persons who represent parties in international arbitration are licensed attorneys. The fact that some representatives are not licensed anywhere, and hence are not subject to any rules of professional conduct, is yet another reason why internationally applicable guidelines are needed.

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Attorneys, Barbarians, and Guerrillas they are not intended to displace otherwise applicable mandatory laws, professional or disciplinary rules. Instead, they aim to provide a guide to conduct for representatives in international arbitral proceedings. To that end, parties may adopt the Guidelines in whole or in part by agreement, and arbitral tribunals may also apply the Guidelines at their discretion after consultation with the parties.203 3.90 With regard to substantive provisions, the Guidelines generally prohibit ex parte com-

munications between a party representative and an arbitrator after the arbitrator has been appointed, with some narrow, generally accepted exceptions. The Guidelines also set out a principle of ‘candour and honesty’ in the presentation of evidence and submissions provided to the tribunal. In addition, the Guidelines seek to make document disclosure more reliable by obliging representatives to inform parties of their obligations to retain and disclose documents, by prohibiting the concealment of evidence from the tribunal, and by specifying that counsel should not make any Request to Produce, or any objection to a Request to Produce, for an improper purpose, such as to harass or cause unnecessary delay.204

3.91 Another important contribution of the Guidelines is their clarification about the role of

counsel in witness preparation. Guideline 24 states:

A Party Representative may, consistent with the principle that the evidence given should reflect the Witness’s own account of relevant facts, events or circumstances, or the Expert’s own analysis or opinion, meet or interact with Witnesses or Experts in order to discuss and prepare their prospective testimony.

The Comment to Guideline 24 clarifies that: As part of the preparation of testimony for the arbitration, a Party Representative may meet with Witnesses . . . to discuss their prospective testimony [and] help a Witness in preparing his or her own Witness Statement . . . Further, a Party Representative may assist a Witness in preparing for their testimony in direct and cross-examination, including through practise questions and answers (Guideline 24) [and review] the procedures through which testimony will be elicited and preparation of both direct testimony and cross-examination. Such contacts should however not alter the genuineness of the Witness . . . evidence, which should always reflect the Witness’s own account of relevant facts, events or circumstances . . .

This approach to witnesses may be more appealing to counsel and parties from common law traditions than from the civil law traditions, particularly its endorsement in the Comment of contested practices, such as the rehearsal of practice answers and questions. Whatever limitations may be attributed, however, the Guideline and Comment provide a clearer starting point for tribunals and counsel than had existed before. 3.92 The IBA Guidelines on Party Representation are an important development, but they are

only part of a larger evolution. Effective regulation of counsel in international arbitration is not simply a matter of drafting new rules or guidelines, but also developing an effective enforcement regime. 2. Enforcement

3.93 The most obvious sources for enforcement are arbitral tribunals that are charged with

controlling the proceedings before them. There are, however, doctrinal and jurisdictional   See Guidelines 1 and 3.   See Guidelines 12–17.

203 204

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Internationalization and enforcement questions about whether arbitral tribunals have the power to regulate or sanction counsel. There are also questions about how such power for arbitral tribunals would interplay with existing mechanisms for regulating attorneys within domestic legal systems. The historical view has been that arbitral tribunals do not have the power to disqualify or 3.94 sanction counsel. For example, in 1992, the Iran-US Claims Tribunal ruled that it ‘does not have the power to impose sanctions or disciplinary measures for the presentation of false evidence’ by counsel.205 There are also domestic precedents, mostly in the United States, that provide conflicting answers.206 In the absence of express powers, tribunals redress misconduct through a range of indirect 3.95 means.207 Tribunals rule on these issues when ordering exchange of documents or resolving disputes about parties’ compliance with such obligations; making evidentiary and privilege rulings;208 ruling on claims of alleged conflicts of interest and asserted privileges; granting, denying, or declining to consider requests for disqualification;209 drawing (or refusing to draw) adverse inferences based on alleged misconduct;210 and awarding costs and fees.211 Opposing counsel or parties have on several occasions also reported alleged misconduct to national bar authorities, seeking sanctions against an errant attorney.212 Subject to arbitrators’ obligations of confidentiality, such reporting can also be undertaken by tribunals themselves.213 In making decisions about attorney misconduct, and in the absence of formal rules and powers, tribunals inevitably assess alleged misconduct based on individual members’ own

205   Norman Gabay v Islamic Republic of Iran, Case No. 771, Award (10 July 1991), 27 Iran-US C.T.R. (1992), 40–8. Notably, this decision was by a single Chamber of the Tribunal, which was arguably constrained by other areas of the Tribunal’s jurisprudence that limit the inherent jurisdictional powers. 206   These precedents and their effect on the prospect for self-regulation of counsel in international arbitration will be taken up more expressly and in greater detail in Chapter 6. 207   For guidance of how tribunals can manage proceedings to minimize attorney misconduct and its effects, see Stephan Wilske, ‘Arbitration Guerrillas at the Gate: Preserving the Civility of Arbitral Proceedings when the Going Gets (Extremely) Tough’, in Christian Klausegger et al. (eds.) Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011), 320–21; Günther J. Horvath, ‘Guerrilla Tactics in Arbitration, an Ethical Battle: Is There Need for a Universal Code of Ethics?’ in Christian Klausegger et al. (eds.), Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 303–311. 208  Klaus-Peter Berger, ‘Evidentiary Privileges: Best Practice Standards Versus/and Arbitral Discretion’, 22 Arbitration International 501 (2006). 209  See Brower and Schill, ‘Regulating Counsel Conduct before International Arbitral Tribunals’ 491. 210  Vera van Houtte et al., ‘What’s New in European Arbitration?’ 62 Dispute Resolution Journal (January 2008) 12 (describing findings by Swiss federal tribunal that drawing negative inferences for a party’s refusal to produce documents was an element of the arbitrator’s assessment of the evidence); Stephan Wilske and Martin Raible, ‘The Arbitrator as Guardian of International Public Policy: Should Arbitrators Go Beyond Solving Legal Issues?’ in Catherine A. Rogers and Roger P. Alford (eds.), The Future of Investment Arbitration (2009) 269. 211  See Brower and Schill, ‘Regulating Counsel Conduct before International Arbitral Tribunals’ 491; see also Stephan Schill, ‘Arbitration Risk and Effective Compliance—Cost-Shifting in Investment Treaty Arbitration’, 7 J. World Investment & Trade, 653 (2006). 212  Tom Toulson, ‘Penalty recommended for lawyer accused of bribery in ICSID Case’, Global Arbitration Review, 30 April 2010 (reporting that counsel voluntarily resigned from South African Bar Councils when summoned to disciplinary proceedings for attempting to secure a bribe in exchange for persuading his client to settle on favourable terms). Of course, not all allegations are made based on legitimate and well-founded concerns about misconduct. See Alison Ross and Tom Toulson, ‘Freshfields faces complaint in US court’, Global Arbitration Review, 31 March 2010. 213  See Wilske, ‘Arbitration Guerrillas at the Gate’, 331–2.

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Attorneys, Barbarians, and Guerrillas sense of what constitutes proper attorney conduct, based on their own home ethical rules. For example, a Dutch arbitrator faced with creative arguments by an American attorney may conclude that the American attorney is inherently untrustworthy and may discount or disregard arguments by that attorney.214 That same arbitrator may find offensive certain forms of witness preparation and discount the reliability of that witness, even though the practices are consistent with prevailing practices in the United States.215 Of greater concern, the tribunal may be sanctioning a party for its attorney’s misconduct. 3.96 The need for direct powers over attorneys is perhaps best demonstrated in the North

American Free Trade Agreement (NAFTA) case Pope & Talbot v Canada.216 In that case, the tribunal issued an order reprimanding counsel for a ‘highly reprehensible’ and either ‘intentional’ or reckless breach of a confidentiality order.217 The tribunal did not consider itself as having jurisdictional power to directly sanction counsel, but did seek to impose punishments within the perceived limits of its authority. For example, it indicated that it ‘assume[d]‌ that [counsel] will make the present Decision public’, which harshly criticized counsel for misconduct, a form of public shaming that in many contexts can be regarded as a form of professional sanction.218 The tribunal also imposed costs on the party whose attorney was responsible for the misconduct, and ‘expresse[d] the wish that [counsel] will recognize that it is his conduct which has resulted in this [imposing of costs on his client] and, consequently, he will voluntarily personally assume those costs’.219

3.97 The conventional wisdom about tribunal powers expressed in Pope & Talbot is that ‘the

consensual foundation of arbitration arguably militates against conferring authority on arbitrators to develop and enforce rules of professional conduct of counsel’.220 One of the most vocal proponents of this view was Jan Paulsson: ‘[a]‌rbitrators are named to resolve disputes between parties, not to police the conduct of their representatives, and therefore do not rule on complaints of violations of codes of conduct’.221 While undoubtedly an important voice, Paulsson’s view from 1992 seems to have been eclipsed by modern developments, including the rise of guerrilla tactics. Notably, Paulsson was on the tribunal in HEP v Slovenia, as described earlier in this chapter, but issued a vigorous dissent, criticizing the majority’s approach as ‘nothing short of revolutionary’.

214  This example has been identified as a recurring problem in international tribunals. See Vagts, ‘The International Legal Profession’ 260 (1996). 215  See Hans Van Houtte, ‘Counsel-Witness Relations and Professional Misconduct in Civil Law Systems’, 19 Arbitration International 461 (referring to certain aspects of US practices of witness preparation as ‘daring’; others as ‘flagrant misbehaviour’). 216  Pope & Talbot v Canada, UNCITRAL/NAFTA, Decision on Confidentiality of 27 September 2000, para. 6. 217  Pope & Talbot v Canada, para. 8. 218  Pope & Talbot v Canada, para. 13. 219  Pope & Talbot v Canada, para. 12. 220  Brower and Schill, ‘Regulating Counsel Conduct before International Arbitral Tribunals’ 495. 221  Jan Paulsson, ‘Standards of Conduct for Counsel in International Arbitration’, 3 Amer. Rev. Int’l. Arb., 214 (1992). See also W. Laurence Craig, William K. Park, and Jan Paulsson, International Chamber of Commerce Arbitration, 3rd edn. (Oxford University Press, 2001) s. 8.07 (concluding without explanation that arbitrators do not have the power to hold parties in contempt); but see Thomas E. Carbonneau, ‘National Law and the “Judicialization” of Arbitration: Manifest Destiny, Manifest Disregard or Manifest Error’, in Richard B. Lillich and Charles N. Brower (eds.), International Arbitration in the 21st Century: Towards ‘Judicialization’ and Uniformity? (1993) 129 (suggesting that arbitrators possess the inherent ‘authority to sanction a party’ for refusing to cooperate in good faith with the arbitral proceeding).

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Conclusion Although previously unthinkable,222 the prospect of tribunal-imposed sanctions for counsel 3.98 is also gaining momentum, particularly among arbitrators frustrated with the procedural disruptions caused by misconduct and among parties frustrated by the related increase in costs and delays.223 In response, tribunals are reportedly including in initial procedural orders specific provisions that not only provide guidance on particular ethical issues, but also reserve to the tribunal power to enforce those provisions. The IBA Guidelines on Party Representation did not seek to break any new ground, but as noted at the beginning of this chapter, and explored in greater detail in Chapter 6, the LCIA is working on its own code of ethics that will reportedly be backed up by formal powers for tribunal enforcement. By appending standards for counsel conduct to arbitral rules, the LCIA approach represents an important innovation. Similarly, the new R-58 in the AAA Commercial Arbitration Rules, also described at the beginning of this chapter, provides new powers for arbitrators to redress misconduct, albeit only with respect to parties, not their representatives.

D. Conclusion Back when international arbitration was governed by less formal procedures and adminis- 3.99 tered by a close-knit group of arbitration specialists, the absence of clear ethical guidance was not a serious concern.224 Today, these conflicts and their consequences are impossible to ignore. International arbitration cannot continue to operate with uncertain, unwritten, and culturally variable assumptions about what constitutes proper conduct for attorneys. Attorneys need more guidance about what constitutes proper conduct. Parties need to 3.100 understand better how to plan their legal representation and related case strategy. Arbitrators need more clear guidance and support in making rulings on ethical issues. And if, as is argued in Chapter 6, national bar associations are to be persuaded to relinquish at least partial control over aspects of transnational practice, they need assurance that there is a reliable regime in place to protect client and societal interests implicated in attorney conduct. As more and more new parties and counsel enter the international arbitration community, 3.101 the centre is moving out. As the number of disputes submitted to arbitration have increased significantly, the greatest growth in cases is occurring in regional arbitration centres and involve smaller amounts in dispute. These claims will inevitably introduce to the international arbitration system new parties and counsel, who inevitably expand and amplify the cultural differences that already exist. Conflicts among national ethical rules have not only heightened interest in the develop- 3.102 ment of specialized ethical rules for international arbitration. They have also generated some scepticism as to whether such specialized rules are possible. Given the often fundamental

222  See Vagts, ‘The International Legal Profession’ 255 (observing that ‘[i]‌t appears that, while arbitrators have no authority to suspend or disbar attorneys, they could disqualify attorneys from appearing before them and could impose sanctions for attorney misbehavior when it came to assessing the costs of the arbitration’). 223  See David Elward, ‘ICC beats its chest over “guerrilla” tactics in arbitration’, Global Arbitration Review, 13 August 2010 (quoting Philippe Cavalieros, head of international arbitration at French car company Renault as saying, ‘The ICC system is quite strong, but there should be strengthened systems to apportion sanctions and costs where such tactics arise’.). 224  For an extended discussion of the structural reasons why ethical conflicts in international arbitration are receiving greater attention, see Rogers, ‘Fit and Function in Legal Ethics’.

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Attorneys, Barbarians, and Guerrillas differences in national ethical regimes, some are convinced that ‘there is no workable solution to the problem’ and it is not possible at an international level to ‘go beyond general statements of principle and still obtain consensus’.225 Under this view, any ‘global code would overlap existing standards and be inconsistent with them’ and therefore could not be enforceable.226 3.103 An increasing and increasingly vocal number of leading arbitrators and practitioners have

described the current absence of ethical regulation as a potential crisis that can threaten the legitimacy of international arbitration.227 As some commentators have noted: ‘So far, international arbitration has largely escaped major ethical controversy, but this cannot be taken for granted in the future.’228 Effective ethical norms backed up by meaningful enforcement is the best way to prevent such an ethical controversy from leading to external efforts at the national level to control counsel conduct in international arbitration. To maintain its independence, legitimacy, and effectiveness, international arbitration needs to develop meaningful self-regulation of attorney ethics. The new IBA Guidelines, and related developments in arbitral institutions’ rules, provide an important starting point on the road to self-regulation of counsel in international arbitration. The full implications of this development will be taken up later in Chapter 6.

225 Comments of Audley Sheppard at Session on Ethics in Arbitration at the IBA Annual Meeting, 13 October 2008, reported in Janet Walker, ‘Ethics in arbitration for counsel and arbitrators’, in International Bar Association, Legal Practice Division, Newsletter Arbitration, 11. 226  Comments of Audley Sheppard at Session on Ethics in Arbitration at the IBA Annual Meeting, 11. 227  Brower and Schill, ‘Regulating Counsel Conduct before International Arbitral Tribunals’ 491–2 (‘At issue may ultimately be the legitimacy of the international arbitral system as a whole, in particular inasmuch as . . . [uniform legal ethics for counsel] operate[] not only retrospectively . . . but also prospectively as a mechanism of global governance.’); Address by Doak Bishop at the ICCA Congress on 26 May 2010. 228  Doak Bishop and Margrete Stevens, ‘The Compelling Need for a Code of Ethics in International Arbitration: Transparency, Integrity and Legitimacy’, in Albert Jan van den Berg (ed.), Arbitration Advocacy in Changing Times, ICCA Congress Series 15 (Kluwer Law International, 2011) 391–407.

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4 EXPERTS, PARTISANS, AND HIRED GUNS Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth. Marcus Aurelius For every expert there is an equal and opposite expert; but for every fact there is not necessarily an equal and opposite fact. Thomas Sowell

Expert witnesses are a fixture in modern international arbitration.1 Most sizable cases are 4.01 dominated by complex questions, such as economic trends in energy markets, the causes of engineering failures, the relationship between obscure biotechnology patents, projected profits, and the like. As the number and range of complex legal questions in transnational disputes have increased, reliance on expert witnesses has also increased. They are now considered essential to decipher and distil various types of information for arbitral tribunals. The consequence of this trend is that expert witnessing in international arbitration is a multi-billion dollar industry for the experts.2 It is also an enormous expense for parties. Despite the importance of expert witnesses, their ethical obligations have until recently been 4.02 systematically neglected. In international arbitration, the issue of expert ethics raises many of the same problems analysed in Chapter 2 regarding counsel ethics, but also some unique new ones.3 For example, similar to counsel ethics, there are significant national legal and cultural 1  Guido Santiago Tawil, ‘Attacking the Credibility of Witnesses and Experts’, in The Art of Advocacy (2010) 453 (‘Use of party-appointed experts is a common and widely spread practice in international arbitration.’). 2  The 2007 gross revenues of just one global expert services company, LECG, were reported to be more than US$370 million. ‘LECG Corporation Reports Fourth Quarter 2007 Results, Marketwire’, 12 Feb. 2008, . See also Barry Schlachter, ‘Expert Witness Industry Booming’, Dallas-Fort Worth Star-Telegram, 13 May 2006, at F1 Several expert services companies (LECG, Navigant, Huron Group, and FT Consulting) are publicly traded. 3  See Jean-François Poudret and Sébastien Besson, Comparative Law of International Arbitration, 2nd edn. (Stephen Berti and Annette Ponti, trans., 2007) 662 (‘As numerous legal scholars have pointed out, evidence by expert opinion is one of those subjects where the differences between common law and civil law countries are most marked’) (citing Claude Reymond, ‘Conclusions’, in ‘L’Administration de la Preuve dans les Procédures Arbitrales Internationales’ [‘Taking of Evidence in International Arbitral Proceedings’] 167 (ICC Inst. Int’l Bus. L. & Prac., 1990) (Fr.); Jean-Francois Poudret, in Gerald Aksen, ‘Arbitrage et expertise’ [‘Arbitration and Expertise’] 135–6 (ICC Ins. Int’l Bus. L. & Prac, 1994) (Fr.); J.-F. Poudret, ‘Expertise et droit d’être entendu dans l’arbitrage international’, in Etudes de droit international en l’honneur de Pierre Lalive (1993) 607, 614 (Fr.); Axel Baum, ‘Reconciling Anglo-Saxon and Civil Law Procedure: The Path to a Procedural Lex Arbitrationis’, in R. Briner et al. (eds.), Recht der Internationalen Wirtschaft und Streiterledigung im 21. Jahrhundert: Liber Amicorum Karl-Heinz Böckstiegel [Law of International Business and Dispute Settlement in the 21st Century: Liber Amicorum: Karl-Heinz Böckstiegel] 21, 27 (Carl Heymanns Verlag, 2001)).

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Experts, Partisans, and Hired Guns differences regarding the nature and function of expert witnesses in arbitral proceedings. In some systems, most notably the United States, Australia, and Canada, parties select, compensate, and coordinate with expert witnesses, including communicating with them before they testify.4 In many other jurisdictions, such as Germany, France, and the Netherlands, expert witnesses are generally appointed directly by, and function as an ancillary to, the adjudicatory decision-maker.5 4.03 When these different national traditions, or expert witness archetypes, are used by oppos-

ing parties in a single international arbitration, the problems are obvious. As one commentator posits, perhaps only rhetorically: ‘If one side in the dispute approaches expert witness preparation as an extension of the advocacy process, while the other side adopts notions of impartiality. . . and the three arbitrators themselves hold to widely different notions of what is proper, is there a level playing field for all participants in the dispute resolution process?’6

4.04 Compounding these comparative differences and the fairness concerns that they raise, the

ethics of experts are generally not effectively regulated even within individual national legal systems. To put the problem more bluntly, unlike lawyers, most legal systems do not specifically regulate expert witnesses at all. The main reason for this regulatory gap is that expert witnessing is not, in itself, an occupation or profession. Expert witnesses are most often individuals who belong to an established profession (accounting, engineering, etc.). They lend (or more literally rent) their expertise to an adjudicatory process because an issue in dispute is too complex to be fully understood or resolved without expert guidance. Expert witnesses are, however, only ‘moonlighting’7 from their primary occupations.8

4.05 For these reasons, with a few notable exceptions in England, Australia, and Canada (dis-

cussed in greater detail later), experts are not directly regulated by national legal systems when they act as witnesses.9 In the absence of formal regulation, the most immediate source of guidance regarding proper conduct of experts is the body that regulates the underlying professions to which they belong. That guidance, however, is necessarily focused on those experts’ performance of the primary tasks of their chosen professions as accountants, engineers, and the like. Only rarely do those professional regulatory bodies aim at regulating their members when they serve as expert witnesses in adjudicatory settings.10   See paras 4.18–4.30.   In comparative analysis of national legal systems, I use the term ‘adjudicatory decision-maker’, ‘adjudicator’ or ‘decision-maker’ to cover not only arbitral tribunals, but also juries, which are used most routinely in common law systems, but are also involved in certain criminal proceedings in some civil law systems. This chapter does not address ‘expert determinations’, which is not a form of arbitration. See Gary B. Born, International Arbitration: Law and Practice (Kluwer, 2012) 219. 6  See Mark Kantor, ‘A Code of Conduct of Party-Appointed Experts in International Arbitration—Can One Be Found?’ 849 PLI/Lit 191, 216 (2011). 7  ‘Moonlighting’ is a metaphor for a secondary job, which is usually performed in the late hours after completing a day’s work in a primary occupation. 8  There are, of course, so-called ‘professional experts’, meaning a person who spends all or most of their time serving as a witness or who testifies in large numbers of cases. Despite the terminology, so-called professional experts are not ‘professionals’ under sociological definitions of ‘professions’. See also Magli Sarfatti Larson, The Rise of Professionalism: A Sociological Analysis (1977) 55; Herbert M. Kirtzer, ‘The Professions Are Dead, Long Live the Professions: Legal Practice in a Post-professional World’, 33 L. & Soc’y Rev. 713, 716–8 (1999) (describing three definitions of the term ‘profession’). 9  See paras 4.26–4.30. 10  See 4.64–4.65. 4 5

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Comparative differences in expert witnessing While ethical regulation of expert witnesses is almost non-existent, the costs of unethical 4.06 expert witnessing can be quite high. Experts are used in an overwhelming majority of cases in both national courts and international arbitrations.11 Experts command high fees, which often represent a substantial expense for parties. In addition, tribunals can expend substantial unnecessary time and effort to sort through unreliable testimony.12 Even with that extra expenditure, perhaps the most problematic cost is tribunals’ diminished ability to reach accurate substantive conclusions when forced to sort through misleading expert testimony.13 For these reasons, the ethical conduct of expert witnesses is a topic that has recently and increasingly captured the attention of international arbitration commentators. This chapter surveys the challenges of expert ethics in international arbitration. It begins 4.07 by examining the comparative differences in the nature and purpose of expert testimony in national legal systems. Although historical practices regarding experts are deeply embedded in particular systems, they also garner significant critiques, both from inside and outside the different systems. Section A surveys these national procedures for expert witnessing, while Section B provides an overview of expert witness practice in international arbitration. Finally, Section C previews the theory of self-regulation, developed more extensively in Chapter 6, through proposed reforms for expert witnesses to be developed by the international arbitration community.

A.  Comparative differences in expert witnessing Chapter 2 explored the cultural differences and ethical regulations that pertain to attorneys 4.08 when engaging in pre-testimonial communication with witnesses. Several analogous cultural differences manifest themselves in systems’ treatment of expert witnesses. This section examines, in Subsection 1, the national differences in expert witnessing. Subsection 2 examines the criticisms of these various national traditions and some limited reforms that have been introduced to redress them, particularly in England, Australia, Canada, and public international tribunals. The section concludes with some observations about the limits of legal transplants and analyses why some proposed reforms have not taken hold. 1.  National differences in expert witnessing In common law jurisdictions, most notably the United States, experts are selected and paid 4.09 by the parties. In fact, these witnesses are often described not simply as a ‘party-appointed expert’ or ‘party-selected expert’14 but as a ‘party’s expert’, with the possessive pronoun 11  The extent and frequency of use of experts inevitably varies among different categories of cases, even within a single legal system. Inter-systemic empirical research is not available and would be difficult to conduct given the numerous independent variables. All available information, however, indicates that they are used in the vast majority of cases. In the United States, where there has been extensive empirical research, data suggests that expert testimony is pervasive. For example, a (not dated) sample of 529 civil trials in California in 1985 and 1986 revealed that expert testimony was used in 86% of cases, with an average of 3.3 experts per trial. See Samuel R. Gross, ‘Expert Evidence’, 1991 Wis. L. Rev. 1113, 1118–20 (1991). 12  As one famous US trial judge once lamented: ‘An expert can be found to testify to the truth of almost any factual theory, no matter how frivolous. . . [and] be used to obfuscate what would otherwise be a simple case.’ Jack B. Weinstein, ‘Improving Expert Testimony’, 20 U. Rich. L. Rev. 473, 482 (1986). 13  Joseph Sanders, ‘Expert Witness Ethics’, 76 Fordham L. Rev. 1539, 1539 (2007). 14  Although considered interchangeable, this chapter generally uses the term ‘party-selected expert’ both because it is more precise in that parties do not actually ‘appoint’ experts, but instead ‘retain’ or ‘select’ them. This nomenclature also avoids potential confusion with ‘party-appointed arbitrators’.

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Experts, Partisans, and Hired Guns linguistically signalling that a party somehow owns the expert, or at least his or her testimony. In some non-trivial way, it is accurate to speak of an ‘ownership’ interest. Expert witnesses are carefully selected based on how well their perspectives, opinions, and (ultimately) conclusions fit with parties’ overall case strategy. Unlike other fact witnesses, ethical rules generally permit attorneys to compensate expert witnesses for their time. Some systems even permit experts to be compensated on a contingency fee basis.15 While most jurisdictions prohibit such forms of compensation,16 experts are generally allowed to work closely with counsel and remain intimately involved in case preparation. 4.10 One US commentator offers this explanation of the practical mechanics of experts’ relationships

with attorneys:

Litigation is a complex process, and it is important that attorneys be able to communicate with the experts working on the case. The lawyers will invariably have important information, and perhaps suggestions, that will facilitate the experts’ work. Lawyers may also need constant input from the experts as the case proceeds, so that they may adjust their goals and strategies in light of the experts’ findings.17

Particularly in complex cases, expert testimony is regarded as so essential to parties’ ability to prepare and present their cases that it is treated as an essential procedural right.18 15   Robert W. Wachter, ‘Ethical Standards in International Arbitration: Considering Solutions to Level the Playing Field’, 24 Geo. J. Legal Ethics 1143, Tbl. 1, n. 97 (2011) (citing Regulation 31.22(l)(a) of the Uniform Civil Procedure Rules 2005 (NSW) (Austl.)). 16   See, e.g., Model Rules of Prof ’l Conduct, R. 3.4(b) cmt. 3. (US). While US rules are probably the most flexible in terms of what they permit, even those rules prohibit compensation on a direct contingency fee basis (fees whose payment depends on the outcome of the case). This prohibition, however, only applies to attorneys making such payments, not the expert receiving it. The rule also prohibits lawyers from falsifying evidence or assisting a witness in false testimony. Some scholars argue that this rule should be interpreted as precluding attorneys from presenting expert testimony that is not scientifically valid, and as forbidding the lawyer to coax opinions from the expert that are beyond the realm of the expert’s specialized knowledge. On the other hand, it is possible, even if subject to strenuous objection, for experts to charge non-refundable retainers. See Steven Lubet, ‘The Rush to Remedies:  Some Conceptual Questions About Nonrefundable Retainers’, 73 N.C. L. Rev. 271 (1994) (arguing that non-refundable retainers are ethically permissible); Lester Brickman and Lawrence A. Cunningham, ‘Nonrefundable Retainers Revisited’, 72 N.C. L. Rev. 1 (1993) (arguing in favour of a ban on non-refundable retainers). Most common law countries prohibit contingency fees altogether. See, e.g., SRA Code of Conduct 2011, arts. IB 1.27, OP 1.3 (UK); Legal Profession Act 2004 (NSW) s 325 (Austl.) (Although contingent fees are permitted for expert witnesses. See Regulation 31.22(l)(a) of the Uniform Civil Procedure Rules 2005 (NSW) (Austl.)); Janet Walker, ‘General Report’, in Marcel Storme et al., Dmitry Maleshin (ed.) Civil Procedure in Cross-Cultural Dialogue: Eurasia Context (2012), , 413, 439, 440, 452 (contingency fees prohibited in the Netherlands, Belgium, and Sweden). However, some jurisdictions are becoming more liberal in this respect. For example, Italy and Ontario recently removed their prohibitions on contingency fees. See Law no. 248/2006 (It.) (cited in Chiara Besso, ‘Italian National Report: The Italian litigation system: a civil law system with a touch of common law’, in Storme et al., Civil Procedure in Cross-Cultural Dialogue 269, 274; Janet Walker, ‘General Report’, in Storme et al., Civil Procedure in Cross-Cultural Dialogue 413, 436. In Germany, court-appointed expert witness fees are provided on an hourly rate set in the Expert Witness Compensation Act, but party-appointed fees and expert fees in arbitrations may be freely negotiated. See Volker Triebel and Heiko Plassmeier, ‘The Use of Experts in Litigation and Arbitration in Germany’, in D. Mark Cato, The Expert in Litigation and Arbitration (1999) 155, 160, ¶ 017. In France, expert fees are set by the court. See Robert Goldspink, ‘The Expert Witness in International Litigation’, Cato, The Expert in Litigation and Arbitration 141, 147, ¶ 052. Similarly, in Hong Kong, expert fees are a flat rate set by law. See District Court Civil Procedure (Fees) Rules, no. L.N. 17, (2009) (H.K.), . 17  See Steven Lubet , ‘Expert Witnesses: Ethics and Professionalism’, 12 Geo. J. Legal Ethics 465, 469 (1999). 18  The Swiss Supreme Court has ruled that parties have a right to the appointment of an expert by the arbitral tribunal under certain conditions and that denial of the right is grounds for annulment. See Decision 4P.320/1994 of 6 September 1996; Decision 102 Ia 493, unpublished n. 8; Decision 4P.23/1991 of 25 May 1992 n. 5b. The right is so fundamental that the state may even provide experts in criminal cases. See Ake v Oklahoma, 470 US 68, 83

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Comparative differences in expert witnessing In the US legal system, expert testimony is consistently used in many, if not most, cases, 4.11 from basic tort cases to employment discrimination cases to complex commercial cases.19 In criminal20 and mass toxic tort cases—arguably the genres that define the most distinctive qualities of the US legal system—expert testimony plays an especially pivotal role in establishing liability and developing innovative new legal theories.21 It would be difficult to overstate the importance of expert testimony in US litigation and to US parties and counsel in developing their case strategy. Despite this need for close coordination, however, commentators argue that expert coordi- 4.12 nation with counsel is ethically legitimate only ‘so long as the relationship remains independent and professional roles are not blurred’.22 The meaning of the term ‘independent’ in this context is by no means self-evident. The term ‘independent’ to describe the obligations of an expert who is unilaterally selected and compensated by only one party, and who works extensively with that party’s counsel, cannot have the same meaning as the requirement that an arbitrator remain ‘independent’ of the parties and their counsel. It also necessarily means something different from the ‘independent’ judgment that attorneys are required to exercise under national ethical rules.23 While commentators opine about where the line exists between experts’ professional 4.13 independence and permissible coordination with lawyers, lawyers in practice publicly and expressly doubt such a line exists. As John C. Shephard, the former president of the American Bar Association explained, ‘I would go into a lawsuit with an objective, (1985). In the United States, courts have taken different views on the necessity of arbitrators. Compare Hesfibel Fiber Optik v Four S Group, 315 F. Supp.2d 1365 (D. Fla. 2004) (upholding arbitrator refusal to permit expert to testify), with Bordonaro v Merrill Lynch, Pierce, Fenner & Smith, 805 N.E.2d 1138 (Ohio App. 2004); Olan v Allstate Ins. Co., 622 N.Y.S.2d 33 (App. Div. 1995) (vacating award because of arbitrator’s refusal to allow expert testimony). 19   See Blake Fleetwood, ‘From the people who brought you the twinkie defense; the rise of the expert witness industry’, Wash. Monthly, 1 June 1987, . For those not familiar, a ‘Twinkie’ is a popular, trademarked commercial American snack food renowned for its high sugar content and astoundingly long shelf-life, which is presumed to be attributable to excessive preservatives and other chemicals. 20   Some of the most controversial uses of experts in the United States have arisen in this context, as prosecutors have sought to build cases on some forms of expert testimony that have been determined to be inherently unreliable, such as experts who purport to be able to predict the future dangerousness of sexual offenders. 21  Many US courts have flat-out rejected as unreasonable complaints concerning highly technical subject matter filed by attorneys without consulting an expert. See Dennis R. Suplee et al., The Expert Witness: Law and Practice (The Pennsylvania Bar Institute, 1999) 17–18; see also Shelly Brinker, ‘Opening the Door to the Indeterminate Plaintiff: An Analysis of the Causation Barriers Facing Environmental Toxic Tort Plaintiffs’, 46 UCLA L. Rev. 1289 (1999); Tahirih V. Lee, ‘Court-Appointed Experts and Judicial Reluctance: A Proposal to Amend Rule 706 of the Federal Rules of Evidence’, 6 Yale L. & Pol’y Rev. 480, 488–92 (1988). Arguably, some investment arbitrations resemble mass toxic tort claims, though in reverse, with alleged environmental harms or risks to health and safety operating as defences against investor claims of improper state conduct. See, e.g., Compañiá del Desarrollo de Santa Elena, S.A. v Costa Rica, ICSID Case No. ARB/96/1, (2000) 15:1 ICSID Review FILJ, ¶ 72; Sebastian Perry, ‘US Limestone Investor Sues Oman’, Global Arb. Rev. (13 Dec. 2011); Andrew Newcombe, ‘The Boundaries of Regulatory Expropriation in International Law’, 4 Transnat’l Disp. Mgmt. (July 2007); David A. Gantz, ‘Reconciling Environmental Protection and Investor Rights Under Chapter 11 of NAFTA’, 31 Envtl. L. Rep. 10646 (2001); J. Martin Wagner, ‘International Investment, Expropriation and Environmental Protection’, 29 Golden Gate U. L. Rev. 465 (1999); Julie A. Soloway, ‘Environmental Regulation as Expropriation’, 33 Can. Bus. L.J. 92 (1999). 22  This view has been echoed by other authorities. See Kirk v Raymark Indus. Inc., 61 F.3d 147, 164 (3d Cir. 1995) (‘In theory, despite the fact that one party retained and paid for the services of an expert witness, expert witnesses are supposed to testify impartially in the sphere of their expertise.’). 23  For an extended discussion of how abstract, value-laden terms can ‘lose their meaning and fail to provide meaningful guidance’, see paras 8.72–8.73.

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Experts, Partisans, and Hired Guns uncommitted, independent expert about as willingly as I would occupy a foxhole with a couple of noncombatant soldiers’.24 The academic use of the term ‘independent’ to describe expert witnesses, in other words, contrasts sharply with established practices in the US system. 4.14 While US attorneys are not sure where the line is between assertions of independence and

actual practice, in most civil law systems, the entire idea of drawing such a line is an anathema. In systems such as Germany, France, Italy, Turkey, and the Netherlands, experts are most often appointed by the court.25 For instance, in France, Italy, and Hong Kong, the court has exclusive power to appoint experts, usually selected from an approved list and upon party application. Germany, meanwhile, uses a dual system of court-appointed and partyselected experts, but judges are still required to adopt an expert agreed to by the parties or to select an expert from a prescribed list.26

4.15 Experts in civil law jurisdictions are usually obliged, under applicable procedural rules, to be

neutral and impartial.27 With court-appointed experts in civil law systems, parties can seek to recuse any expert who is not ‘neutral’, and that standard is interpreted as being as rigorous as related judicial obligations.28 In fact, in Germany, the standards for expert and judicial neutrality derive from the same provisions from the German Code of Civil Procedure.29 Under these regimes, it is simply not permissible for counsel to meet with and coordinate their cases with expert witnesses.

4.16 There are some notable exceptions in which the independence obligations of both judges and

experts are less clear. For example, in Brazil, there can be three (or more) expert witnesses, one appointed by the judge and two party-selected experts. Under Brazilian procedures, a judge can communicate with the parties ex parte at any time to ask them questions and can appoint an expert witness, if necessary, to act either separately or in coordination with expert witnesses selected by each of the parties.30 24  See Carol Pogash, ‘Myth of the “Twinkie defense”: The verdict in the Dan White case wasn’t based on his ingestion of junk food’, San Francisco Gate, 23 Nov. 2003, ; Blake Fleetwood, ‘From the people who brought you the twinkie defense; the rise of the expert witness industry’, Wash. Monthly, 1 June 1987, . The so-called ‘twinkie defence’ is a derisive term for the theory, advanced through experts, that the accused in a high profile political assassination was not responsible for his actions because he was depressed from eating too much junk food. Actually, this reference is a myth. The defence argued that junk food was a symptom of depression, not the cause. 25   Christian Borris, ‘The Reconciliation of Conflicts Between Common Law and Civil Law Principles in the Arbitration Process’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 147, 161; Marijke Malsch and Ian Freckelton, ‘Expert Bias and Partisanship: A Comparison Between Australia and the Netherlands’, 11 Psychol. Pub. Pol’y & L. 42, 46–47 (2005); Murat Ozsunay, ‘Turkish National Report’, in Storme et al, Civil Procedure in CrossCultural Dialogue 323. 26   See Goldspink, ‘The Expert Witness in International Litigation’, 141, 141–5; David Leonard, ‘The Expert in Hong Kong and Mainland China’, in Cato, The Expert in Litigation and Arbitration 321, 328. 27   See Aldo Berlinguer and Vincenzo Vigoriti, ‘The Expert Witness in Italian Litigation and Arbitration’ (A.D.R. Colvin trans.), in Cato, The Expert in Litigation and Arbitration 185, 187. 28   See Sven Timmerbeil, ‘The Role of Expert Witnesses in German and U.S. Civil Litigation’, 9 Ann. Surv. Int’l & Comp. L. 163, 173–74 (2003). 29   See Timmerbeil, ‘The Role of Expert Witnesses in German and U.S. Civil Litigation’, 174 (citing German Civil Procedure Code (ZPO) §§4245). 30   Teresa Arruda Alvim Wambier, ‘Brazilian National Report: Brazilian civil procedure: between common law and civil law?’ in Storme et al., Civil Procedure in Cross-Cultural Dialogue 253, 262, .

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Comparative differences in expert witnessing 2.  Criticisms and exceptions Even if national traditions regarding expert witnesses are firmly entrenched within particular 4.17 legal systems, the prevailing common law and civil law traditions are subject to significant criticisms from both inside and outside their home systems. These criticisms have given rise to proposed reforms and important exceptions to the prevailing approaches in both common law and civil law systems. As described in more detail later, some reforms have been successful, but many other reforms have not. This section explores what factors contribute to the success or failure of particular reforms. Building on these observations, Section C of this chapter identifies specific reforms for expert witnesses in international arbitration that it is later proposed in Chapter 6 be adopted as part of a larger project of self-regulation. a.  The United States As already described in Chapter 3, the US legal system is probably the most permissive in 4.18 terms of the nature and extent of contact permitted between lawyers and experts. As a consequence, it is often regarded as the most tolerant of expert witnesses who have partisan dispositions. The criticisms of this tolerance are legion. On the one hand, critics argue that these expert witnesses fail to clarify the issues to be adjudicated because their testimony is tailored to further the client’s case strategy, rather than to provide a full analysis of a given issue.31 Relatedly, critics argue that excessively adversarial experts tend to polarize the case, potentially creating conflict and even confusion when in actuality little conflict exists.32 Both of these critiques illustrate the basis for yet a third critique—that exaggeration by 4.19 partisan experts distorts an adjudicator’s decision-making, which in turn creates incentives for experts to exaggerate further. For example, if a respondent’s expert values lost profits at US$5 million and the claimant’s expert at US$10 million, a tribunal might reasonably believe that the true value is around US$7.5 million. The inclination toward splitting the difference between expert conclusions is relatively natural, but it invites potentially exaggerated and unethical contentions from experts. For example, if the claimant’s expert opines that the value of lost profits is US$100 million 4.20 instead of a more reasonable estimate of US$10 million, it would transform the average from US$7.5 million into US$52.5 million. In this respect, compromise outcomes can penalize honest expert estimates and reward improperly exaggerated testimony. A compromise decision is especially problematic when the true value is either very high or very low, for example, in cases when the proper outcome is that there is no liability. This propensity for decision-makers to gravitate toward an average between numbers presented by experts has been documented by empirical and social scientific research into US jury decision-making.33 It has also been documented among judges and, by extension, arbitrators.34   See Samuel R. Gross, ‘Expert Evidence’, 1991 Wis. L. Rev. 1113, 1188 (1991).   See Gross, ‘Expert Evidence’, 1181; E. Donald Elliott, ‘Toward Incentive-Based Procedure: Three Approaches for Regulating Scientific Evidence’, 69 B.U. L. Rev. 487, 493 (1989). 33  Empirical research in which participants were given one of three different versions of a trial transcript (without expert testimony, with plaintiff expert testimony only, and one containing a ‘battle’ between experts) showed that jurors unaided by expert testimony awarded significantly less, and that jurors tended to match the values suggested by experts, and, in the case of a battle of experts, jurors tended not to compromise between expert values (instead, jurors preferred one over the other). See Allan Raitz et al., ‘Determining Damages: The Influence of Expert Testimony on Jurors’ Decision Making’, 14 Law & Hum. Behav. 385 (1990). 34  While arbitrators are more sophisticated than jurors, as analysed in more detail in Chapter 7, arbitrators, like judges, are subject to other cognitive biases, such as anchoring, framing, hindsight bias, the representativeness heuristic, and egocentric biases. See paras 8.08–8.09. 31

32

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Experts, Partisans, and Hired Guns 4.21 Some reforms have been proposed to resolve these perceived excesses. Most notably, Federal

Rule of Evidence 706 was developed to allow for courts to appoint experts.35 The primary purpose of Rule 706 is not to displace party-selected experts, but instead to supplement them. As one commentator explains, the purpose of a court-appointed expert is ‘to enhance the information available to the trier of fact’ and ‘fill in gaps of knowledge necessary for resolution of the parties’ dispute’.36

4.22 Despite this limited role, and urging by several commentators,37 US judges are reticent to

use Rule 706 to appoint their own experts.38 Even precautionary measures imposed by the Rule have apparently not been sufficient to overcome judicial concerns.39 Empirical research shows that this reluctance40 is a result of ‘uneasiness with court-appointed experts [because of ] difficulty in accommodating such experts in a court system that values, and generally anticipates, adversarial presentation of evidence’.41 Leading scholars advocating for courtappointed experts even concede that this judicial reluctance is ‘understandable’ since judges are products of an adversarial tradition that is deeply ‘ingrained’.42

4.23 Another, even more recent, effort highlights another difficulty in enacting effective reforms.

In 2011, the Litigation Section of the American Bar Association (ABA) sought to promulgate Standards of Conduct for Experts Retained by Lawyers (Standards). Although the Litigation Section announced in August 2011 that the Standards had been adopted by the

35   While there had been some support at common law for a notion that judges had the power to appoint expert witnesses, Federal Rule of Evidence 706 sought more directly to respond to concerns about expertshopping, expert venality, and the reluctance of many reputable experts to involve themselves in litigation. See Fed. R. Evid. 706 advisory committee’s note. See also Lee, ‘Court-Appointed Experts and Judicial Reluctance’, 480. For an older source that predates the reform, see John M. Sink, ‘The Unused Power of a Federal Judge to Call His Own Expert Witnesses’, 29 S. Cal L. Rev. 195 (1956). 36   Karen Butler Reisinger, Note, ‘Court-Appointed Expert Panels: A Comparison of Two Models’, 32 Ind. L. Rev. 225, 234 (1998). 37   See, e.g., Bert Black et al., ‘Science and the Law in the Wake of Daubert: A New Search for Scientific Knowledge’, 72 Tex. L. Rev. 715, 795–6 (1994); Joe S. Cecil and Thomas E. Willging, ‘Accepting Daubert’s Invitation: Defining a Role for Court-Appointed Experts in Assessing Scientific Validity’, 43 Emory L.J. 995 (1994). 38   ‘A survey of federal judges revealed that 81% had never appointed an expert under FRE 706, and only 8% had appointed a court expert more than one time.’ See Timmerbeil, ‘The Role of Expert Witnesses in German and U.S. Civil Litigation’ 168. 39  Federal Rule of Evidence 706 provides several checks on expert testimony, including requiring that the expert testify at trial, that the expert inform the parties of any findings, that the parties have an opportunity to depose and cross-examine the expert, and that the court delineates the duties of the expert in written form made available to the parties. Moreover, the court’s appointment decision is reviewable on appeal. 40  In another survey, 37% of state court judges (judges who preside at courts in the legal systems of the individual states) surveyed indicated that they believed that court-appointed experts could save both the courts and litigants time and money. See Stephanie Domitrovich et al., ‘State Trial Judge Use of Court Appointed Experts: Survey Results and Comparisons’, 50 Jurimetrics J. 371, 388–9 (2010). Despite this belief, judges are reluctant to appoint experts because of the cost, concerns about procedural fairness, and bias potential from court-appointed experts. 41  Joe S. Cecil and Thomas E. Willging, ‘Court-Appointed Experts,’ in 33-SE 2 Reference Manual on Scientific Evidence, 2nd edn., § VII (Fed. Judicial Ctr., 2000). See also Joe S. Cecil and Thomas E. Willging, ‘Accepting Daubert’s Invitation: Defining a Role for Court-Appointed Experts in Assessing Scientific Validity’, 43 Emory L.J. 995, 1019 (1994); Douglas H. Ginsburg, ‘Appellate Courts and Independent Experts’, 60 Case W. Res. L. Rev. 303, 304 (2010) (judge/author arguing that it would be ‘a mistake for the federal courts of appeals to retain or consult experts’ because, among other things, the practice is ‘inconsistent with the adversary system’). 42  Kenneth S. Broun, ‘Proposals for improvement of the practice relating to expert testimony’, 1 McCormick on Evidence, 6th edn., § 17 (2006).

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Comparative differences in expert witnessing ABA,43 the Standards were abruptly withdrawn to be further revised.44 The Standards were revised two more times before being unofficially tabled in August 2012.45 A brief look at the adopted-then-retracted Standards reveals both the substantive complexities and the politics in regulating expert witnesses. As an initial matter, there are serious doubts about whether the ABA even has the author- 4.24 ity to impose standards on experts who act as witnesses. The ABA is a professional organization with indirect authority over the members of one profession—lawyers46—but no authority (direct or indirect) over other professions. In an apparent attempt to resolve this jurisdictional problem, the Standards were framed as providing guidance to experts who are ‘retained by lawyers’. Specifically, they stated an aspiration that lawyers incorporate the Standards into their letters retaining experts, so that ‘experts and clients will have a common understanding of what is expected’.47 Most objections to expert testimony, however, are not tied to misunderstandings about what is expected. The objections, instead, are that expert witnesses implicitly or explicitly collude to have experts bend their testimony to suit client and attorney expectations. Even more importantly, this attempted jurisdictional side-step was itself a profound mis- 4.25 step—technically clients retain experts, not lawyers.48 These are only a few of the most obvious problems with the now-withdrawn proposed Standards. In light of these problems, repeated revisions, and defeat of the Standards, it is fair to assume that any renewed effort to promulgate standards will be facing some serious challenges. b.  England, Australia, and Canada The procedural traditions of England, Australia, and Canada are often characterized as gen- 4.26 erally less starkly adversarial than the United States. In keeping with these characterizations, these jurisdictions place more restrictions on attorneys in their interactions with witnesses generally, and with expert witnesses in particular. As noted in Chapter 2, the common practice of ‘preparing’ a witness —particularly rehearsing questions and answers—would be considered unethical in Australia and England, and illegal in Canada.49 Despite restraints on 43   The Standards themselves are available at (announcing passage of resolution adopting Standards). 44  See Memorandum, 2011 Annual Meeting of the American Bar Association and Meeting of the House of Delegates, 2 Sept. 2011, 19. (On behalf of the Section of Litigation, Lawrence J. Fox of Pennsylvania withdrew Resolution 101B adopting the Standards of Conduct for Experts Retained by Lawyers, dated August 2011.) 45  See Mark Hansen, ‘Three Strikes: Litigation Section Drops Proposal for Guidelines on Dealing with Expert Witnesses’, ABA J., 1 Nov. 2012, . 46  ABA authority over the legal profession is indirect because its power is limited to promulgating Model Rules, which are then either adopted or not (or, as is most often the case, adopted with amendments) by states, which then make the rules binding on attorneys licensed in those states. For an overview of the ABA’s function in promulgating the Model Rules, see Am. Bar Assoc., Constitution and Bylaws, art. 11 (2011–12); Quintin Johnstone, ‘Bar Associations: Policies and Performance’, 15 Yale L. & Pol’y Rev. 193, 228 (1996). 47  ABA Standards of Conduct for Experts Retained by Lawyers, intro. (Aug. 2011). 48  An attorney often acts as a client’s agent in selecting expert witnesses and facilitating their retention on behalf of the client. Attorneys are not, however, permitted to retain and compensate experts directly in most US jurisdictions, except for general expenses and compensation permitted by law. See Model Rules of Prof ’l Conduct, R. 3.4(b) cmt. 3; David L. Faigman et al., Modern Scientific Evidence: The Law and Science of Expert Testimony (West, 2009–10) § 3:13; Lawrence J. Fox and Bruce Green, ‘Ethical Issues in Dealing with Experts’, in Wendy Gerwick Couture and Allyson W. Haynes (eds.), Litigators on Experts: Strategies for Managing Expert Witnesses from Retention through Trial (2010) 126, 127–8, 134–5. 49  Karen L.K. Miller, ‘Zip to Nil?: A Comparison of American and English Lawyers’ Standards of Professional Conduct’, 32 ALI-ABA 199, 199–223, 204 (1995).

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Experts, Partisans, and Hired Guns advocates, many of the same concerns raised about US procedures regarding expert witnesses have also been raised in these jurisdictions. 4.27 In response to these concerns, Lord Woolf undertook to evaluate expert witness practice in

England and Wales. His assessment could easily also describe concerns about the US system: Expert witnesses used to be genuinely independent experts. Men of outstanding eminence in their field. Today they are in practice hired guns: there is a new breed of litigation hangers on, whose main expertise is to craft reports which will conceal anything that might be to the disadvantage of their clients.50

These comments predicated the so-called ‘Woolf Report’, which in turn led to the extensive reforms in the procedural rules of England and Wales. The overall purpose of the reforms regarding expert witnesses was to compel experts to function in the service of the judge, and not simply in the interests of the party that retained the expert. To that end, the reforms included many rules that provide guidance to experts on how to fulfil this new mandate.51 Not all assessments of the Woolf reforms are uniformly laudatory. Most practising barristers report, however, that there has been a significant shift in practices and decorum involving experts in English courts since the reforms were implemented.52 In light of their success, the Woolf Reforms have inspired similar, and in some instances even more far-reaching, reforms in Australia,53 Canada, Hong Kong, Singapore, and New South Wales.54 Canada’s reforms are particularly interesting. Following Australia’s lead, in 2010 the Federal Court in Canada similarly introduced a Code of Conduct as a schedule to the Federal Rules of Court. The Code requires counsel to provide expert witnesses with the Code of Conduct when they are initially retained and further requires that expert witnesses sign a certificate acknowledging that they agree to be bound by the Code.55 4.28 Another innovation introduced in Australia, and more recently in England, is expert witness

‘hot-tubbing’ (also referred to as ‘concurrent evidence’, ‘joint meeting’, ‘expert conferencing’, 50   See The Right Honourable the Lord Woolf, Access To Justice (1995) ch. 23, ¶ 10, available at (quoting journal Counsel for November/December 1994). See also The Right Honourable the Lord Woolf, Master of the Rolls, Access to Justice: Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (1996), . 51   See Civil Procedure Rules, rule 35.3 (2005) (Eng.), (providing that ‘the duty of an expert [is] to help the court on the matters within their expertise’ and that ‘[t]‌his duty overrides any obligation to the person from whom experts have received instructions or by whom they are paid’). 52  Compare John Peysner and Mary Seneviratne, Dep’t for Constitutional Affairs, The Management of Civil Cases: The Courts and Post-Woolf Landscape (2005), (reporting a significant reduction in the ‘hired gun’ approach to expert witnessing), with M. Herman, ‘Success of Woolf reforms limited, research claims’, Times Online, 26 July 2006 (claiming Woolf reform has failed in its objective to make litigation less complex and more accommodating, with shorter, more predictable timescales and more affordable costs for those with limited financial means). For further discussion of the utility of oaths as applied to expert witnesses, see paras 4.71–4.81. 53  For example, the Federal Court of Australia has issued guidelines to attorneys who propose retaining an expert to prepare a report or give evidence in a proceeding: ‘1. General Duty to the Court: 1.1 An expert has an overriding duty to assist the court on matters relevant to the expert’s area of expertise. 1.2 An expert witness is not an advocate for a party even when giving testimony that is necessarily evaluative rather than inferential. 1.3 An expert witness’s paramount duty is to the court and not to the person retaining the expert.’ See Fed. Ct. of Austl., Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia (2007), . 54  Mariam J. Masid, ‘Hydrology and the Courts: The Role of Expert Witnesses—A Study on Potential Reforms’, 11 U. Denv. Water L. Rev. 1, 9–10 (2007). 55  See Federal Courts Rules, SOR/98-106, R. 52.2, Form 52.2, sched. (2010) (Can.), ; ‘Rules Amending the Federal Courts Rules (Expert Witnesses)’, 143 Can. Gazette (17 Oct. 2009), .

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Comparative differences in expert witnessing and ‘witness conferencing’).56 The essence of hot-tubbing is that the experts present their findings to the court virtually simultaneously. After being sworn in together, the experts in turn summarize key findings and ask questions of and respond to the opposing expert. Subsequently, counsel and the court may or may not cross-examine and question the experts, who may, in turn, again have opportunities to elaborate.57 Although criticized by some,58 hot-tubbing has also been commended as an effective technique to save time and hone in on key areas of dispute.59 Joint conferencing is another procedural innovation that has been used with success in 4.29 Australian courts60 and is now recognized under Australian federal rules and New South Wales.61 Similar to hot-tubbing, joint conferencing also allows discourse between two or more experts. The difference is that in joint conferencing, the experts meet outside of court and off the record. The experts then produce a document outlining areas of agreement and disagreement discussed during the joint conference.62 Joint conferencing is used in international arbitration,63 but is also still subject to scepticism about its adequacy for exceptionally complex scientific issues that involve mixed questions of law and fact.64

56   See, e.g., Doug Jones, ‘Party Appointed Experts: Can They be Usefully Independent?’ 8(1) Transnat’l Disp Mgmt. 1, 10–11 (2011); Yuka Fukunaga, ‘Chapter 5: Experts in WTO and Investment Litigation’, in Jorge A. Huerta-Goldman, Antoine Romanetti, et al. (eds.), 43 WTO Litigation, Investment Arbitration, and Commercial Arbitration, Global Trade Law Series (Kluwer, 2013) 135, 158; Harris Bor, ‘Chapter 24: Expert Evidence’, in Julian D.M. Lew, Harris Bor, et al. (eds.), Arbitration in England, with chapters on Scotland and Ireland (Kluwer, 2013) 503, 508–09; Jeff Waincymer, Procedure and Evidence in International Arbitration (Kluwer, 2012) 967–72, § 12.14.11–14; Born, International Arbitration 170; Antonio Hierro, ‘Reducing Time and Costs in ICC International Arbitration Excess Time and Costs of Arbitration: An Incurable Disease?’ 2012 Spain Arb. Rev. 37, 45 (2012); Caroline E. Foster, Science and the Precautionary Principle in International Courts and Tribunals: Expert Evidence, Burden of Proof and Finality (Cambridge University Press, 2011) 123–25; David Sonenshein and Charles Fitzpatrick, ‘The Problem of Partisan Experts and the Potential for Reform Through Concurrent Evidence’, 32 Rev. Litig. 1, 55–62 (2013); Elizabeth Reifert, Comment, ‘Getting into the Hot Tub: How the United States Could Benefit from Australia’s Concept of “Hot Tubbing” Expert Witnesses’, 89 U. Det. Mercy L. Rev. 103 (2011); Frances P. Kao et al., ‘Into the Hot Tub . . . A Practical Guide to Alternative Expert Witness Procedures in International Arbitration’, 44 Int’l Law. 1035 (2010); Adam Liptak, ‘In US, Expert Witnesses Are Partisan’, N.Y. Times, 11 Aug. 2008, ; Lisa C. Wood, ‘Experts Only: Out of the Hot Tub and into the Joint Conference’, 22-Fall Antitrust 89 (2007). 57  See Patricia D. Galloway, ‘Using Experts Effectively & Efficiently in Arbitration’, 67-OCT Disp. Resol. J. 26, 33 (2012); Kao et al., ‘Into the Hot Tub . . . A Practical Guide to Alternative Expert Witness Procedures in International Arbitration’, 1037. 58  See., e.g., Galloway, ‘Using Experts Effectively & Efficiently in Arbitration’ 245 n. 295 (‘The hot tub might place undue emphasis on the general appeal of an expert, rather than the solidity of the positions he or she is endorsing.’); Mark Kantor, Valuation for Arbitration (2008) 300–1; Wood, ‘Experts Only: Out of the Hot Tub and into the Joint Conference’. 59  Wolfgang Peter, ‘Witness Conferencing Revisited’, in S. Bond (ed.), Arbitral Procedure at the Dawn of the New Millenium, Reports of the International Colloquium of CEPANI (2004) 156 et seq. 60  See, e.g., Seven Network Ltd. v News Ltd. [2007] FCA 1062, on appeal [2009] FCAFC 166 (Austl.). 61  See Federal Court Rules, Select Legislative Instrument 2011 No. 134, § 23.15 (2011) (Austl.), Supreme Court New South Wales, Practice Note SC Gen 11: Supreme Court—Joint Conferences of Expert Witnesses (17 Aug. 2005), . 62  Wood, ‘Experts Only: Out of the Hot Tub and into the Joint Conference’. 63  The IBA Rules on the Taking of Evidence in International Commercial Arbitration (2010), Article 5.4, specifically recommends joint conferencing where experts have submitted reports on ‘the same or related issues’. 64  See Foster, Science and the Precautionary Principle in International Courts and Tribunals 79.

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Experts, Partisans, and Hired Guns 4.30 As discussed in greater detail later, these reforms curbed some of the most extreme excesses

in those jurisdictions that have adopted them. The function of experts, however, remains largely the same (i.e., they are selected, compensated, and prepared by parties and their counsel). It remains exceedingly rare for judges to appoint expert witnesses directly, and the procedural reforms described earlier have not completely dispelled that reluctance.65 As a result, there remain questions about the true value of the reforms,66 as well as more precise questions about which aspects of the reforms have effectuated the most significant changes.

c.  Germany, Italy, and the Netherlands 4.31 In civil law systems, such as Germany and the Netherlands, conventional procedures for court-appointed experts have also been subject to criticism, and some exceptions have developed to redress concerns. The advantage of tribunal-appointed experts is that they avoid many of the biases introduced by an adversarial process in which experts are selected and paid by parties and work intimately with parties’ legal advocates in the development of case strategy. While this is an obvious advantage, more recent criticism takes aim at the extent to which court-appointed experts are, or can be considered to be, completely unbiased. The notion of objectivity or neutrality in an expert witness, it is argued, is based on an unduly restrictive definition of bias. 4.32 While the cognitive biases of expert witnesses have not been studied as extensively as those

of judges (and, by extension, arbitrators) they are an unsurprising by-product of the fact that experts, like judges and arbitrators, are human.67 Despite training and even scientific understanding of cognitive biases, experts are not themselves insulated from cognitive biases that affect all humans. Some of these biases are particularly prevalent, and uniquely troubling, in legal decision-making. One is the so-called anchoring bias, in which individuals facing a complex decision rely on initial reference values that may be incomplete or irrelevant in making their final assessment. For instance, litigators may hypothesize a low damage estimate to an expert in an initial meeting that then becomes the basis for a cognitive anchor in later ostensibly independent analysis.68 This form of cognitive bias, and the erroneous analysis it

  Malsch and Freckelton, ‘Expert Bias and Partisanship’, 45.   See, e.g., Rupert Jackson, ‘Review of Civil Litigation Costs: Final Report’, The Stationary Office, ch. 38 s 3, 379–84 (2009), (analysing in detail the effects of the Woolf Reforms in England and Wales, criticizing their effectiveness concerning experts, and posing suggestions for improvement); Doug Jones, ‘Party Appointed Expert Witnesses in International Arbitration: A Protocol at Last’, 24 Arb. Int’l 137, 154 (2008) (discussing the rejection of Woolf Report suggestions for appointment of a single expert in Australia and international arbitration); John Hansen, Lecture, ‘Courts Administration, the Judiciary and the Efficient Delivery of Justice: A Personal View’, 11 Otago L. Rev. 351, 371 (2005–08) (criticizing that Woolf Reforms do not go far enough and that more fundamental changes are necessary to improve access to justice in New Zealand); NSW Law Reform Commission, Report 109: Expert Witnesses (June 2005) (criticizing the Woolf Report’s suggestions concerning disclosure of all communications between the parties and experts and determining that the policy reasons for maintaining client legal privilege over such communications outweighed the potential benefits of disclosure); Gary Edmond, ‘After Objectivity: Expert Evidence and Procedural Reform’, 25 Sydney L. Rev. 131 (2003) (deconstructing basic premises of Woolf-esque reforms in England and Australia and challenging that reforms threaten to surreptitiously raise admissibility standards, contribute to the transformation of the judicial role, privilege repeat litigants, and increase the vulnerability of the judiciary to exogenous criticism). 67  Recent ‘discoveries’ about the humanness of judges, and by extension arbitrators, is taken up later in Chapter 7. 68  See Christopher Tarver Robertson, ‘Blind Expertise’, 85 N.Y.U. L. Rev. 174, 185–86 (2010) (illustrating how anchoring may affect expert witnesses). 65 66

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Comparative differences in expert witnessing can produce, is difficult to dispel, even when the expert knows that anchoring information is from a source that has low credibility.69 While this potential for innocent or unknowing expert witness bias raises some concerns about the information parties’ and their counsel provide to expert witnesses, it and other known cognitive biases also raise fundamental questions about the possibility for any expert, including a court-appointed expert, to be truly ‘unbiased’. While presumably free of pressure from parties, tribunal-appointed experts may be subject 4.33 to various types of cognitive and heuristic biases that are introduced by their own background and training, personal beliefs, or ‘prevailing culture’.70 As Stephen Jay Gould, famed evolutionary biologist and popular science writer, explained: Facts are not pure and unsullied bits of information; culture. . . influences what we see and how we see it. Theories, moreover, are not inexorable inductions from facts. The most creative theories are often imaginative visions imposed upon facts; the source of imagination is also strongly cultural.71

Gould is expressing here the same sentiment as Marcus Aurelius at the beginning of the chapter. Objective perception of facts and assessments of truth are subject to the limitations of sensory perception and the cognitive biases that affect how humans, including experts, process information. In the adjudication context, an expert opinion is an assertion of expert knowledge regarding 4.34 an interpretation of, or prediction about, an often complex amalgam of observable facts.72 It is not usually, in itself, an objective fact or an individual’s recollection of an objective fact.73 Applying Gould’s observation to expert witnesses, in processing data to make an expert interpretation or prediction, the expert witness necessarily refracts the data through his or her experience and predispositions. This refraction is not so much an aberration, but in fact part of why experts with particular backgrounds or forms of expertise are selected, by either parties or tribunals. Reliance on a single, tribunal-appointed expert obscures this reality. Instead, when a tri- 4.35 bunal appoints a ‘neutral’ court-appointed expert, the process itself implies that there is only one right answer to the complex issues that are the subject of expert testimony.74 In   Robertson, ‘Blind Expertise’, 185–6 (reporting on the outcome of empirical research).   Ellen E. Deason, ‘Court-Appointed Expert Witnesses: Scientific Positivism Meets Bias and Deference’, 77 Or. L. Rev. 59, 101–2 (1998). One potential mechanism for reducing this type of error is to appoint multiple experts. See E. Donald Elliott, ‘Toward Incentive-Based Procedure: Three Approaches for Regulating Scientific Evidence’, 69 B.U. L. Rev. 487, 504 (1989). 71  Stephen Jay Gould, The Mismeasure of Man (1981) 21–2. 72  In contrast, fact witnesses testify regarding their perception of the observable facts. Often, they are either precluded from giving opinions regarding the interpretation of such facts or any such opinions are discounted by the factfinder. 73  ‘[A]‌scriptions such as impartial, neutral or objective are not productive ways to think about expertise and expert knowledge, especially in relation to legal procedural reform.’ Gary Edmond, ‘After Objectivity: Expert Evidence and Procedural Reform’, 133. 74  Even in the so-called hard sciences, scientific inquiries speak in terms of ‘theories’ not ‘facts’. A theory is a body of consistent scientific knowledge that has not yet been disproved by experiment. In experimental sciences, a theory can never be ‘proved’, it can only be ‘disproved’ by experiment. Gravity, for example, is a theory, not a fact, despite its almost universal acceptance. See Matthew Cutchen, ‘Selman v Cobb County School District: The Evolution of Establishment Clause Jurisprudence’, 7 Rutgers J. L. & Religion 9, 40–1 (2006); Stephen Jay Gould, ‘Darwinism Defined: The Difference Between Fact and Theory’, 8 Discover 64, 64 (Jan. 1987) (‘Facts are the world’s data; theories are explanations proposed to interpret and coordinate facts.’). 69 70

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Experts, Partisans, and Hired Guns some instances, the tribunal’s selection of an expert from one school of thought (as opposed to another) can be outcome determinative.75 Meanwhile, reliance on tribunal-appointed experts may also discourage introduction of novel legal theories that might be sustained by expert testimony.76 4.36 Bias in cognition of so-called neutral experts may seem less pernicious than biases that result

from adversarial attempts to co-opt expert opinions. They can, however, be even more problematic precisely because they are more likely to escape detection or challenge.77 As a practical matter, it can be exceptionally difficult for parties to challenge a court-appointed expert’s opinion, particularly since expert analysis may be needed to identify the source of certain errors.78 Even if an important error were found by a party-retained expert, the perceived neutrality of tribunal-appointed experts may cause adjudicatory decisionmakers (judges, juries, or arbitrators) to treat their testimony as unassailable.79 In other words, the perception of impartiality may create an undeserved ‘aura of infallibility’ for tribunal-appointed experts.80 As one scholar notes, ‘All error is problematic, but unrebutted error is especially so.’81

4.37 In an effort to redress this problem, most procedural rules in national legal systems and in

international arbitration preclude adjudicators from treating expert opinion as decisive on an issue.82 These rules legally require tribunals to make an independent determination of 75   One study found that only 3% of judges and juries decided cases inconsistent with the opinions of experts. Joe S. Cecil and Thomas E. Willging, ‘Court-Appointed Experts’, in Reference Manual on Scientific Evidence (New York, 2000) 528, 553. See also Gerald Walpin, ‘America’s Adversarial and Jury Systems: More Likely to Do Justice’, 26 Harv. J.L. & Pub. Pol’y 175, 182 (2003) (commenting that use of a single expert can obscure any divergent views from the court). 76   It is perhaps for these reasons that international tribunals rarely rely on a single court-appointed expert. The power to appoint experts at its own initiative was used only once each by the Permanent Court of International Justice (see Case Concerning the Factory at Chorzów (Germany v Poland), Claim for Indemnity— Merits (1928) PCIJ Series A, No. 13, para. 8; Order of 13 Sept. 1928, PCIJ Series A, No. 17) and the International Court of Justice (see Corfu Channel case (United Kingdom v Albania), Order of 17 Dec. 1948, ICJ Rep. 1947–1948. 77   Gary Edmond, ‘After Objectivity: Expert Evidence and Procedural Reform’, (arguing that procedural reforms are based on ‘simplistic images of objectivity’ and that expert evidence reforms threaten to raise admissibility standards, privilege repeat litigants, and transform the judicial role). 78   See Timmerbeil, ‘The Role of Expert Witnesses in German and US Civil Litigation’, 172. By contrast, in an adversarial system, party-selected experts have an incentive to identify and expose the errors of an opposing expert, as well as the knowledge, skills, and professional credibility to do so—sometimes to the detriment of both parties. See Brian L. Cutler and Steven D. Penrod, Mistaken Identification: The Eyewitness, Psychology, and the Law (Cambridge University Press, 1995); Lora M. Levett and Margaret Bull Kovera, ‘The Effectiveness of Opposing Expert Witnesses for Educating Jurors about Unreliable Expert Evidence’, 23 Law & Hum. Behav. 363, 363 (2008) (‘The presence of opposing expert testimony caused jurors to be sceptical of all expert testimony rather than sensitizing them to flaws in the other expert’s testimony.’); Jennifer L. Devenport and Brian L. Cutler, ‘Impact of defense-only and opposing eyewitness experts on juror judgments’, 28 Law & Hum. Behav. 569 (2004) (‘Expert testimony did not significantly influence juror judgments, but the opposing expert testimony diminished the credibility of the defence expert in the eyes of the jurors.’). 79  D. Mark Cato, ‘Interlocutory and Hearing Problems and the Expert Witness’, in The Expert in Litigation and Arbitration (1999) 587, 631–4 (discussing computer software copyright infringement case where tribunal-appointed expert drastically simplified lengthy reports of party-appointed experts). See also Michael P. Reynolds, The Expert Witness in Construction Disputes (2002) 111 (citing Abbey National Mortgages and Others v Key Surveyors Nationwide and Others [1996] 1 WLR 1534; tribunal used same logic as computer software case in Cato, but in construction case). 80  Fed. R. Evid. 706 advisory committee’s note. 81  Robertson, ‘Blind Expertise’, 199. 82  See Sven Timmerbeil, ‘The Role of Expert Witnesses in German and US Civil Litigation’, 166 (2003) (‘In the end, the fact finder has to decide which ‘story’, or testimony, is more plausible.’); Eric Ilhyun Lee, ‘Expert

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Comparative differences in expert witnessing the issue on which expert testimony is offered. The impulse to defer, however, is strong, particularly when there is only one source of expert testimony and the issue is extraordinarily complex. The most ardent critics argue that the impulse to defer is more operative than expected or desirable.83 Another potential protection against these concerns about court-appointed experts is that 4.38 civil law systems increasingly permit parties to retain their own experts.84 As a practical matter, however, parties rarely do. There are several reasons for this reluctance. First, experts can usually be appointed by a party only if the court grants the party permission. When such experts are permitted, their opinion does not generally have the same value as that of a court expert.85 Instead, in civil law systems, an opinion by a party-selected expert is generally treated as an assertion of a party, not as evidence.86 As a consequence, the party submits the expert’s report to the court, but the party-selected expert is not examined at trial.87 The utility of party-selected experts is thus generally limited in civil law systems, making it difficult to justify any benefit as weighed against the cost of retaining an outside expert. Just as courts are reluctant in the United States to appoint experts to counterbalance excessive partisanship of party-selected experts, parties in civil law systems are sceptical about the value of party-selected experts to counterbalance concerns about court-appointed experts. d.  Expert mechanisms in public international tribunals To understand the ethics of expert witnesses in international arbitration it is also useful 4.39 to look at existing practices in public international courts. Like international arbitration, these tribunals also adjudicate disputes among parties from various cultural and legal traditions, and consequently share many of the same challenges faced by international arbitral

Evidence in the Republic of Korea and Under the US Federal Rules of Evidence: A Comparative Study’, 19 Loy. L.A. Int’l & Comp. L.J. 585, 617 (1997) (‘Like a US jury, a Korean court is free to reject expert testimony and may render a decision contrary to the expert’s opinion.’); Robert F. Taylor, ‘A Comparative Study of Expert Testimony in France and the United States: Philosophical Underpinnings, History, Practice, and Procedure’, 31 Tex. Int’l L.J. 181, 202–3 (1996). 83  Robertson, ‘Blind Expertise’, 198–9; Timmerbeil, ‘The Role of Expert Witnesses in German and US Civil Litigation’, 180 (2003) (‘Too much depends on the court expert, and in many cases, it is not the judge but the court expert who decides the case.’). 84  See Ruth Fenton, ‘A Civil Matter for A Common Expert: How Should Parties and Tribunals Use Experts in International Commercial Arbitration?’ 6 Pepp. Disp. Resol. L.J. 279, 281 (2006) (discussing use of party-appointed experts in the Netherlands); Timmerbeil, ‘The Role of Expert Witnesses in German and US Civil Litigation’, 177–81 (2003) (describing use of party-appointed experts in Germany); Goldspink, ‘The Expert Witness in International Litigation’, 141 (discussing party-appointed experts in Germany). 85  See Malsch and Freckelton, ‘Expert Bias and Partisanship’ (research has shown that defence lawyers in the Netherlands do not often make use of the few opportunities they have to request an ‘own’ expert); Timmerbeil, ‘The Role of Expert Witnesses in German and US Civil Litigation’, 177–8; Goldspink, ‘The Expert Witness in International Litigation’, 144; Lee, ‘Court-Appointed Experts and Judicial Reluctance’, 492–4. 86  Malsch and Freckelton, ‘Expert Bias and Partisanship’, 47; Lee, ‘Court-Appointed Experts and Judicial Reluctance’, 492–4. 87  See Timmerbeil, ‘The Role of Expert Witnesses in German and US Civil Litigation’, 177–78 (2003).

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Experts, Partisans, and Hired Guns tribunals.88 A major difference is that public international tribunals are tethered to State- and treaty-based rules and may be less flexible than international arbitral tribunals that are the product of private party agreement.89 Nonetheless, with increasing reliance on expert witnesses to opine on scientific and technical matters, public international courts have etched a growing record of procedural innovation in assimilating expert evidence. 4.40 Both public international tribunals90 and parties in proceedings before those tribunals are

generally presumed to have powers to appoint experts. In contrast to national jurisdictions, public international adjudications often use a combination of both party-selected and tribunal-appointed experts simultaneously, and like recent reforms, have them operate in dialogue with each other.91 Another procedural innovation for seeking expertise, which arguably avoids at least some of the concerns with existing national practices, is for tribunals to seek out independent outside international organizations for expert advice. For example, the International Court of Justice (ICJ) rules specifically provide for opinion requests from public international organizations such as the World Health Organization (WHO).92 World Trade Organization (WTO) panels have similarly sought expert advice for international organizations.93 The use of such organizations in place of experts can raise unique concerns

88   This is particularly true for investor-state arbitration. See Christopher Shreuer, ‘The Relevance of Public International Law in International Commercial Arbitration: Investment Disputes’, (unpublished manuscript). 89   Even the procedures of investor-state arbitrations which generally arise from treaty terms tend to be more flexible than those of public international courts. See Donald Francis Donovan, ‘The Relevance (or Lack Thereof ) of the Notion of “Mandatory Rules of Law” to Investment Treaty Arbitration’, 18 Am. Rev. Int’l Arb. 205 (2007); Susan D. Franck, ‘The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions’, 73 Fordham L. Rev. 1521, 1536–37 (2005) (describing the comparative lack of remedies in public international law versus international investment arbitration). 90   See, e.g., International Court of Justice, Rules of Court, arts. 51, 67 (adopted 14 Apr. 1978, entered into force 1 Jul.1978) (ICJ Rules) (outlining procedure for the tribunal to appoint experts); Iran–United States Claims Tribunal Final Rules of Procedure, 3 May 1983, 1 Iran–US CTR 57, art. 27 (same); North American Free Trade Agreement (signed 17 Dec. 1992, entered into force 1 Jan. 1994) 32 ILM 289, 605, art. 2014 (same); European Union, Rules of Procedure of the Court of Justice (signed 25 Sept. 2012, entered into force 1 Nov. 2012) OJ L 265, arts. 64, 70 (same); World Trade Organization, Understanding on Rules and Procedures Governing the Settlement of Disputes, art. 13, App. 4 and explanation to app. 4 (1994), (same). 91  See, e.g., The Corfu Channel case (United Kingdom v Albania) Order of 17 December 1948, ICJ Rep. 1947– 1948 124; Judgment of 9 April 1949, ICJ Rep. 1949 (ICJ case); European Communities—Measures Concerning Meat and Meat Products (Hormones), Complaint by Canada (WT/DS48), Complaint by the United States (WT/DS26) (cited in Foster, Science and the Precautionary Principle in International Courts and Tribunals 113) (WTO case). The two-phase WTO procedures for expert evidence (discussed in this section) have allowed tribunal-appointed experts and party-selected experts to indirectly discuss evidence. See, e.g., Canada—Continued Suspension of Obligations in the EC—Hormones Dispute, Complaint by the EC (WT/DS321); Report of the Panel, Report of the Appellate Body, adopted 14 Nov. 2008, paras 252–7, 1056–7 (WTO case). 92  See ICJ Statute, art, 34(2); ICJ Rules, art. 69(4). See e.g., WHO, Effects of Nuclear War on Health and Health Services, 2nd edn. (1987), cited in Legality of the Use by a State of Nuclear Weapons in Armed Conflict (Advisory Opinion), 8 July 1996, ICJ Rep. 1996 66, 78. 93  See, e.g., European Communities—Measures Concerning Meat and Meat Products (Hormones), Complaint by Canada (WT/DS48), para. 6.7, Complaint by the United States (WT/DS26), para. 6.8 (consulting secretariats of the Convention on Biological Diversity, the Codex Alimentarius Commission, the Food and Agriculture Organization of the United Nations, the International Plant Protection Convention, theWorld Organisation for Animal Health, the United Nations Environment Programme, and the WHO) (cited in Foster, Science and the Precautionary Principle in International Courts and Tribunals 103); Canada—Continued Suspension of Obligations in the EC—Hormones Dispute, Annex E (consulting the Codex Alimentarius Commission, the Joint Expert Committee on Food Additives of the Food and Agriculture Organization and the WHO, and the International Agency for Research on Cancer).

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Comparative differences in expert witnessing about independence since, like individual experts, organizations often have their own policy objectives that can affect their assessment of particular issues.94 Another, less salutary development is that some international courts have diluted or dis- 4.41 solved altogether the delineation between advocates, arbitrators, and experts. In the ICJ context, expert witnesses have appeared in court in the role of full advocates or counsel.95 In the Gabcıkovo-Nagymaros case,96 for example, Hungary had its four scientists appear as ‘advocates’ while Slovakia had its two scientists appear as ‘counsel and experts’. Counsel for Hungary made a point of clarifying that Slovakia’s scientists, like Hungary’s scientists, appeared as advocates.97 Similarly, in the Case concerning Pulp Mills,98 both parties included six delegation members as ‘scientific advisors and experts’. Correspondence between the parties clarified that these representatives were speaking in the capacity of advocates rather than expert witnesses.99 The perceived advantage of experts-as-advocates is that it arguably eliminates concerns about expert biases and shifts the enquiry from questionable assumptions about independence to more direct questions about persuasiveness on the substance of the issue. Such blurring of roles, however, requires considerable procedural jerry-rigging concerning how to handle examination and cross-examination of experts, whether or not to require standard expert oaths,100 confusion of mixed issues of fact and law, and misconstruction of professional ethical obligations.101 In fact, experts-as-advocates created such difficulty in Pulp Mills that in a separate opinion one judge specifically criticized the practice and underlined the Court’s ‘unequivocal indication’ that ‘the practice should not be repeated in future cases’.102 Another practice that occurs among public international tribunals is the allowance of direct 4.42 appointment of experts to the tribunal,103 either by appointing experts directly as voting or non-voting members of the panel, or conscripting technical assessors to advise the panel.104 For example, both the ICJ and tribunals formed under the UN Convention on the Law of the Sea (UNCLOS) retain power to appoint non-voting experts to the tribunal.105 The perceived 94   See, e.g., Case concerning Pulp Mills on the River Uruguay (Argentina v Uruguay), Public sitting held on Monday 28 September 2009, CR 2009/20 (trans.), paras 31–32 (Argentina arguing that one of the experts consulted by a so-called neutral international organization was not ‘independent’). 95  See Foster, Science and the Precautionary Principle in International Courts and Tribunals 88–94 (discussing the use and limitations of experts as advocates before international courts and tribunals). 96  Case concerning the Gabcıkovo-Nagymaros Project (Hungary/Slovakia), Judgment of 25 Sept. 1997 ICJ Rep. 1997. 97  Verbatim Record, 25 Mar. 1997, 10.00am, 39 (cited in Foster, Science and the Precautionary Principle in International Courts and Tribunals 89). 98  Case concerning Pulp Mills on the River Uruguay (Argentina v Uruguay), Request for the Indication of Provisional Measures, Order of 13 July 2006 ICJ Rep. 2006. 99  Verbatim Record, 22 Sept. 2009 (trans.) 2 (cited in Foster, Science and the Precautionary Principle in International Courts and Tribunals 89). 100  See ICJ Rules, art. 64. 101  See Pulp Mills, Separate Opinion of Judge Greenwood, para. 27; Foster, Science and the Precautionary Principle in International Courts and Tribunals 90–91. 102  See Pulp Mills, Separate Opinion of Judge Greenwood, para. 28. 103  See generally, Foster, Science and the Precautionary Principle in International Courts and Tribunals 125–29; Ruth Fenton, ‘A Civil Matter for A Common Expert: How Should Parties and Tribunals Use Experts in International Commercial Arbitration?’ 6 Pepp. Disp. Resol. L.J. 279, 283-85 (2006). 104  See Joost Pauwelyn, ‘The Use of Experts in WTO Dispute Settlement’, 51 Int’l & Comp. L.Q. 325, 345 (2002). 105  See Statute of the International Court of Justice, arts. 30, 50 (1945) (ICJ Statute); ICJ Rules, arts. 9, 67; United Nations Convention on the Law of the Sea, art. 289 (1982) (UNCLOS).

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Experts, Partisans, and Hired Guns advantage of this approach is to ensure the panel’s ability to identify, understand, and address technical issues in a more efficient manner than formal admission of expert evidence.106 This blurring of roles, this time with experts-as-adjudicators, raises similar and even more significant concerns, however, about these experts’ potentially excessive (and non-transparent) influence on the tribunal.107 Expert input directly to the tribunal bypasses evidentiary processes and precludes any opportunity for parties to comment, challenge, or refute.108 Perhaps due to these concerns, arbitrators appointed based solely on scientific or technical qualifications are relatively rare, and primarily used under narrow jurisdictional guidelines for highly technical matters. 4.43 Where experts are required on a tribunal, courts generally maintain a permanent roster of

technical experts in order to facilitate selection by the parties.109 For instance, experts chosen for special arbitral tribunals under Annex VIII of UNCLOS are selected from lists of experts in a range of environmental and maritime fields; individuals on those lists are nominated by Member States and the lists themselves are maintained by subsidiary bodies or public international organizations.110 Drawing experts from permanent, formally maintained lists is a practice that is also used in certain civil law jurisdictions.111 Commentators have urged expanding the practice in the international public law context—notwithstanding the potential impracticalities of maintaining up-to-date lists of experts in a wide range of fields and subject matters.112

4.44 Another expert procedure worth adding to this survey is the unique WTO two-phase pro-

cedure for assimilating expert evidence.113 In the first phase, the tribunal submits a list of written questions to the experts based on party requests submitted to the tribunal. After the experts provide written responses, parties may comment on both the expert responses and the comments of other parties, which are then circulated to all parties and experts. The tribunal then drafts a report on the preliminary questions, seeking confirmation of the report’s accuracy from the experts where necessary. The second phase consists of ‘joint meetings’, whereby the parties, experts, and arbitrators meet together to clarify the issues. First, the experts introduce and discuss the issues and party comments. The parties submit follow-up questions, which are relayed by the tribunal to the experts, who provide on-the-spot answers.   See Fenton, ‘A Civil Matter for A Common Expert’ 283.   Pauwelyn, ‘The Use of Experts in WTO Dispute Settlement’ 345. 108  Dana H. Freyer, ‘Assessing Expert Evidence’, in Lawrence W. Newman and Richard D. Hill (eds.), The Leading Arbitrators’ Guide to International Arbitration, 2nd edn. (2008) 429, 436. 109  See, e.g., Permanent Court of Arbitration, Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment, art. 8(3) (2012) (‘For the purpose of assisting the parties and the appointing authority the Secretary-General will make available a list of persons considered to have expertise in the subject-matters of the dispute at hand for which these Rules have been designed.’); UNCLOS, annex VIII (outlining procedure for assembling special arbitral panels consisting of scientific experts chosen from a permanent list). 110  See UNCLOS, annex VIII, art. 2; Christopher C. Joyner, ‘Compliance and Enforcement in New International Fisheries Law’, 12 Temp. Int’l & Comp. L.J. 271, 297 (1998). 111  See Andrew W. Jurs, ‘Balancing Legal Process with Scientific Expertise: Expert Witness Methodology in Five Nations and Suggestions for Reform of Post-Daubert U.S. Reliability Determinations’, 95 Marq. L. Rev. 1329, 1389–90 (2012) (describing use of expert lists in Germany); Jean de Hautecloque, ‘French Judicial Expertise Procedure and International Arbitration’, 4 J. Int’l Arb. 77, 79 (1987) (same in France). 112  See Foster, Science and the Precautionary Principle in International Courts and Tribunals 127. 113  See Foster, Science and the Precautionary Principle in International Courts and Tribunals 114–23; Theofanis Christoforou, ‘Settlement of Science-Based Trade Disputes in the WTO: A Critical Review of the Developing Case Law in the Face of Scientific Uncertainty’, 8 N.Y.U. Envtl. L.J. 622, 631–32 (2000). See also WTO Dispute Panel Report on EC Measures Concerning Meat and Meat Products (Hormones), 18 Aug. 1997, WT/DS26/R/USA, paras 6.5–6.9; WTO Dispute Panel Report on United States—Import Prohibition of Certain Shrimp and Shrimp Products, 15 May 1998, WT/DS58/R, paras 5.8–5.9. 106 107

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Expert witnesses in international arbitration The arbitrators may then ask for clarification of certain points, after which the experts provide closing statements. Finally, experts may comment on the transcript of the joint meetings before it is entered into the record. Joint meetings share much in common with hot-tubbing, outlined in Section A.2.b. The 4.45 major difference with the WTO practice is that the tribunal acts as an intermediary between experts and parties, which eliminates cross-examination and separate pleading. Proponents of the WTO approach argue that it promotes clarity on technical issues and enough flexibility to accommodate all parties.114 Critics, meanwhile, complain that it has an off-the-cuff nature that reduces predictability, and that time constraints on oral meetings may lead to incomplete answers and back-of-the-envelope data guesstimates instead of needed precision.115 Many of the innovations that exist in international tribunals are either not feasible or perhaps 4.46 not particularly desirable in international arbitration. They demonstrate, however, that the role of expert witnesses is not limited to the formulations developed in national legal systems. With this background of expert witnesses in national legal systems and before public international tribunals, the next part turns to the ethics of experts in international arbitration.

B.  Expert witnesses in international arbitration The inability of the national procedural reforms to resolve perceived problems in national 4.47 legal systems is, at least in part, symptomatic of legal transplants more generally. A ‘legal transplant’ is a ‘doctrine or legal rule that is transposed from one legal system into another’.116 The reforms described in earlier sections seek to permit court-appointed experts in common law systems and party-selected experts in civil law systems. Unfortunately, these ‘legal transplants’, like their botanical counterparts, are not always adaptable to a new climate. There is extensive scholarly analysis of the reasons why some legal transplants ‘take root’ and others are rejected as incompatible with the host state’s ‘procedural ecology’.117 In the case of expert 114   The procedure outlined here has evolved largely due to party request and experience, as the WTO rules concerning expert review are extremely broad and flexible. See WTO, Understanding on Rules and Procedures Governing the Settlement of Disputes, art. 13, App. 4 and explanation to app. 4 (1994), . 115  See Foster, Science and the Precautionary Principle in International Courts and Tribunals 119–20. 116  See Mirjan Damaska, ‘The Uncertain Fate of Evidentiary Transplants: Anglo-American and Continental Experiments’, 45 Am. J. Comp. L. 839, 839 (1997) (noting that ‘[i]‌nspiration for procedural reform is increasingly sought in the legal thesaurus of foreign countries’). Comparativists have refined the idea of legal transplants to be more precise. In this vein, there are both ‘direct’ and ‘indirect’ transplants, as well as ‘cross-pollenizations’, meaning ‘horizontal’ relations between national courts interacting across borders. See Anne-Marie Slaughter, ‘Judicial Globalization’, 40 Va. J. Int’l L. 1103, 1112 (2000); John Bell, ‘Mechanisms for Cross-Fertilisation of Administrative Law in Europe’, in Jack Beatson and Takis Tridimas (eds.), New Directions in European Public Law (1998) 147. 117  See Daniel Berkowitz, Katharina Pistor, and Jean-Francois Richard, ‘The Transplant Effect’, 51 Am. J. Comp. L. 163, 179–81 (2003) (rejecting the theory that colonial origin matters in success of legal institutions and arguing that legal systems are more receptive to transplanted legal norms when the transplant makes a significant adaptation of the foreign formal legal order to initial conditions and is familiar with the borrowing legal system); Jonathan M. Miller, ‘A Typology of Legal Transplants: Using Sociology, Legal History and Argentine Examples to Explain the Transplant Process’, 51 Am. J. Comp. L. 839 (2003) (discussing the successes and failures of legal transplants based on the role of the donor country in the transplant and a model of four typologies: cost-savings, external compulsion, material and political gains for entrepreneurial legal importers, and capacity to increase institutional legitimacy through the prestige of a foreign transplant). ‘Procedural ecology’ is a term borrowed from Mirjan Damaska’s encyclopaedic array of artful metaphors. Damaska, ‘The Uncertain Fate of Evidentiary Transplants’ 840.

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Experts, Partisans, and Hired Guns witnesses, the procedural innovations did not mesh well with culturally entrenched,118 longstanding, and familiar processes.119 Instead, they ‘pushe[d]‌against the deeply ingrained norms, roles, and incentive structures’ in the respective systems.120 4.48 In contrast to largely unsuccessful legal transplants at the national level, international arbitra-

tion provides exceptionally fertile ground for procedural innovations.121 The ‘norms, roles, and incentive structures’ that inhibit reform at a national level are not firmly entrenched in international arbitration procedures. Quite the opposite; international arbitral procedures were developed to accommodate parties, arbitrators, and counsel from different legal cultures. The prevailing procedures in international arbitration are those that have proven popular and effective to parties, counsel, and arbitrators from many jurisdictions working together. As a result, they usually represent procedural hybridizations based on an amalgam of national procedural traditions that have had their mettle tested in international arbitral proceedings.122

4.49 The prevailing international arbitral procedures have been distilled down and codified in

the International Bar Association (IBA) Evidence Rules.123 While this codification provides 118   See George C. Harris, ‘Testimony for Sale—The Law and Ethics of Snitches and Experts’, 28 Pepp. L. Rev. 1, 3 (2000). See also Edward K. Cheng, ‘Same Old, Same Old: Scientific Evidence Past and Present’, 104 Mich. L. Rev. 1387, 1392 (2006). 119   See Cheng, ‘Same Old, Same Old: Scientific Evidence Past and Present’, 1392 (‘That the problems surrounding adversarial experts have stayed with us for over two hundred years should be entirely unremarkable. The methods of presenting expert knowledge are fundamentally the same today as they were in 1783, and the system’s structure breeds these pathologies. If anything, the system’s attributes have gotten worse.’). 120   Robertson, ‘Blind Expertise’, 178 (describing the limited use of court-appointed experts in the US system). See also, Miller, ‘A Typology of Legal Transplants: Using Sociology, Legal History and Argentine Examples to Explain the Transplant Process’, (discussing the success or failure to accept foreign legal institutions, generally); Berkowitz, Pistor, and Richard, ‘The Transplant Effect’, 179–81 (norms must adapt to the receiving country and mesh on a cultural conceptual level). 121   For instance, Professor Langbein proposed radical reforms for US litigation based on the so-called ‘German advantage’. The proposal spawned an avalanche of responses explaining why the US could not adopt these proposed reforms. See, e.g., Bradley Bryan, ‘Justice and Advantage in Civil Procedure: Langbein’s Conception of Comparative Law and Procedural Justice in Question’, 11 Tulsa J. Comp. & Int’l L. 521 (2004) (favourably comparing the German method of civil procedure to the US method through the lenses of the Langbein and Allen articles); Michael Bohlander, ‘The German Advantage Revisited: An Inside View of German Civil Procedure in the Nineties’, 13 Tul. Eur. & Civ. L.F. 25 (1998) (comparing Langbein’s and Allen’s arguments in addition to providing his own insight into the German system); Gregory F. Hauser, ‘Representing Clients from Civil Law Legal Systems in US Litigation: Understanding How Clients from Civil Law Nations View Civil Litigation and Helping Them Understand US Lawsuits’, 17-AUT Int’l L. Practicum 129, 132–3 (2004) (outlining systemic differences between civil and common law litigation); John C. Reitz, ‘Why We Probably Cannot Adopt The German Advantage in Civil Procedure’, 75 Iowa L. Rev. 987 (1990) (criticizing ‘The German Advantage’); Ronald J. Allen Kurt, ‘The German Advantage in Civil Procedure: A Plea for More Details and Fewer Generalities in Comparative Scholarship’, 82 Nw. U. L. Rev. 705 (1988) (concluding that Professor Langbein’s proposals for German law in the US only work at a level of abstraction); John H. Langbein, ‘The German Advantage in Civil Procedure’, 52 U. Chi. L. Rev. 823 (1985). 122  See Serge Lazareff, ‘International Arbitration: Towards a Common Procedural Approach’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration (1999) 31, 31 (noting an increasing awareness among both arbitrators and practitioners of ‘an emerging “harmonised procedural pattern” in international arbitration’); Alan Scott Rau and Edward F. Sherman, ‘Tradition and Innovation in International Arbitration Procedure’, 30 Tex. Int’l L.J. 89, 90–5 (1995); Marianne Roth, ‘False Testimony in International Commercial Arbitration: A Comparative View’, 7 N.Y. Int’l L. Rev. 147, 152 (1994) (‘The trend in international commercial arbitration is to follow a procedure which combines the most desirable features of common and civil law practices.’); Andreas F. Lowenfeld, ‘The Two-Way Mirror: International Arbitration as Comparative Procedure’, 7 Mich. Y.B. Int’l Legal Stud. 163, 163 (1985). 123  See IBA Rules on the Taking of Evidence in International Arbitration (2010), [IBA Evidence Rules

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Expert witnesses in international arbitration a degree of continuity and shared understanding, unlike national rules, the IBA Evidence Rules are not founded on as culturally entrenched norms as are rules in national legal systems. Efforts to reform the IBA Evidence Rules are subject to the same political wrangling that occurs with any negotiated compromise in cross-cultural settings. There are, however, much lower hurdles at the international level than the potentially insurmountable political obstacles that must be overcome to ratify reforms within national legal systems. In international arbitration, reforms are adopted at the retail level. Proposed reforms are 4.50 not imposed as top-down pronouncements, but as flexible options that are distilled out of prevailing practices and can be adopted in particular cases. Unpopular reforms are simply ignored or rejected. As discussed later in this chapter, this measure of freedom affords international arbitration an opportunity to redefine the role, and correspondingly define the ethical obligations, of the expert witness in a manner that is simply not as feasible in national legal systems. Since States do not generally regulate the ethics of experts appearing in their own national 4.51 court proceedings, it is not surprising that national arbitration laws generally ignore the ethics of experts in arbitral proceedings. Both institutional and ad hoc international arbitral rules are similarly elliptical about the conduct and ethical obligations of expert witnesses.124 Recently, the topic of expert ethics has garnered interest from commentators,125 but the direction of future reforms is not yet certain. The establishment of ethical standards for experts raises some unique challenges and opportunities for international arbitration. One additional challenge in regulating expert witnesses in international arbitration is that, 4.52 unlike domestic legal systems, there is no single predominant model for how expert witnesses are appointed and function. International arbitration permits a range of possible models for expert witnesses. While this flexibility creates some challenges, it also affords unique opportunities for new regulation at the international level and within international arbitral procedures. To the extent that the most promising reforms seek to re-acculturate participants and restructure the role of experts, such reforms may be more feasible in international arbitration than they are in domestic systems, where the role of experts is more culturally entrenched.

(2010)]; Pedro J. Martinez-Fraga, ‘Good Faith, Bad Faith, but Not Losing Faith: A Commentary on the 2010 IBA Rules on the Taking of Evidence in International Arbitration’, 43 Geo. J. Int’l L. 387, 430–1 (2012) (outlining major advantages and shortcomings of the 2010 IBA Evidence Rules). 124  See Mark Kantor, ‘A Code of Conduct of Party-Appointed Experts in International Arbitration—Can One Be Found?’ 849 PLI/Lit 191, 199–200 (2011). The Milan Chamber rules of international arbitration appear to be the only rules that impose obligations on expert witnesses, but somewhat unhelpfully, they simply state that experts must be ‘neutral’ in the same manner as arbitrators. The Code of Ethics of the Camera Arbitrable of Milan provides in Article 1.2: ‘This Code of Ethics shall apply by analogy to expert witnesses to the arbitral body appointed in the arbitral proceedings administered by the Chamber of Arbitration.’ As explained in more detail later, this provision apparently pertains only to experts who are appointed by the tribunal. See paras 4.61–4.70. Another exception is ICSID Arbitration Rule 35(3), which requires that experts ‘solemnly declare upon [their] honour and conscience that [their] statement[s]‌will be in accordance with [their] sincere belief[s]’. This requirement applies equally to tribunal- and party-appointed arbitrators. 125  The most thorough examination of the issue to date is by Mark Kantor in his article, ‘A Code of Conduct of Party-Appointed Experts in International Arbitration—Can One Be Found?’. See also Ruth Fenton, ‘A Civil Matter for a Common Expert’. For general discussions on the use of experts in international arbitration, see Pierre A. Karrer, ‘The Civil Law and Common Law Divide: An International Arbitrator Tells It Like He Sees It’, 63-APR Disp. Resol. J. 72 (2006).

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Experts, Partisans, and Hired Guns 4.53 In the remainder of this chapter, Subsection 1 explores procedural innovations, often

inspired by some of the national reforms described in the previous part. The prevailing standards and practices in international arbitration focus on efforts to improve them. Subsection 2 considers a few deviations from standard practice that cause problems, and finally Section C assesses certain reforms that have recently been introduced in international arbitration. 1.  Expert witness traditions and innovations

4.54 One hallmark of international arbitration’s procedural flexibility is that it aims to accommo-

date party preferences. As a result, the nature of and procedures for introducing expert witness evidence often depend on party preferences. These preferences are usually determined by express agreement or indirectly as determined by the predilections of arbitral tribunals selected by the parties. Tribunals comprised of arbitrators from common law jurisdictions will ordinarily permit the parties to present party-selected expert witnesses through procedures consistent with the traditions in common law systems.126 In contrast, parties or tribunals dominated by specialists from civil law backgrounds ‘may be more skeptical about the benefits and costs of party-nominated expert witnesses’.127 It still happens that civil law dominated arbitral tribunals, ‘particularly more traditionally-minded ones’,128 may permit only tribunal-appointed experts.

4.55 New rules are increasing flexibility and making expert witness options more expressly subject

to individual party preference, even absent mutual party agreement. For example, the IBA Evidence Rules provide that ‘A Party may rely on a Party-Appointed Expert as a means of evidence on specific issues’129 and that in response to a Report from a tribunal-appointed expert, ‘any party shall have the opportunity to respond to the Expert Report’ by various means including through ‘an Expert Report by a Party-Appointed Expert’.130 These provisions seem to create rights for parties to use party-selected experts that are not conditioned either on tribunal permission or agreement from an opposing party.

4.56 More generally, the IBA Evidence Rules provide a number of innovative options including

preliminary party-selected expert conferences, rights to cross-examine, access materials relied upon by tribunal-appointed experts, and even hot-tubbing.131 These rules can be mixed and matched in whole or in part.132 While historically arbitral rules were more predisposed towards either common law or civil law approaches,133 institutions are increasingly hybridizing and addressing in more detail the manner expert evidence is assimilated. For example,

  See Gary B. Born, International Commercial Arbitration (2009) 1861.  Born, International Commercial Arbitration 1861. 128 Born, International Commercial Arbitration 1861. 129  IBA Evidence Rules, art. 5(1). 130  IBA Evidence Rules, art. 6(5). 131  See IBA Evidence Rules, arts. 5(4), 8. See also Fabian von Schlabrendorff, ‘Ethical Standards for Arbitrators, Hybrid Proceedings, Rules of Transnational Law: Are We Moving Towards a Uniform Law of International Arbitration?’ 2009 Annals Fac. L. Belgrade Int’l Ed. 90, 103 (2009) (explaining the purpose of the IBA Rules as procedural options for parties and tribunals). 132  See IBA Evidence Rules, Foreword. 133  See, e.g., SIAC Arbitration Rules, arts. 22, 23 (2013); CIETAC Arbitration Rules, art. 42 (2012); ICC Rules of Arbitration, art. 25 (2012); UNCITRAL Arbitration Rules, art. 29 (2010); AAA International Arbitration Rules, art. 22 (2010); JCAA Commercial Arbitration Rules, R.  38 (2008); ICSID Rules of Procedure for Arbitration Proceedings, R. 34–36 (2006); WIPO Arbitration Rules, arts. 54, 55 (2002); LCIA Arbitration Rules, arts. 20, 21 (1998). 126 127

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Expert witnesses in international arbitration the Chartered Institute of Arbitrators (CIArb) provides online practice guidelines covering procedures and strategies for using party-selected and tribunal-appointed experts.134 The China International Economic and Trade Arbitration Commission (CIETAC) also recently expanded its arbitration rules to allow for oral expert evidence,135 and the International Chamber of Commerce (ICC) includes a special International Chamber for Expertise that can be consulted to recommend or appoint experts or even administer expert proceedings under its rules.136 In addition to procedures that have been distilled into formal rules and protocols, other 4.57 innovations are also being experimented with on an ad hoc basis. For example, ‘expert teaming’ (also known as ‘Sachs protocol’) is regarded as an innovation that finds middle ground between party-selected and tribunal-appointed expert traditions.137 In expert teaming, the tribunal first invites parties to each provide a short list of potential expert candidates. Then, the tribunal chooses one expert from each list jointly as an ‘expert team’.138 Afterward, parties and the tribunal may choose other procedures for presenting expert evidence and examining the experts, such as cross-examination, expert conferencing, and the like. In the alternative, parties and tribunals may craft something similar to the two-phase 4.58 procedure used in the WTO (discussed earlier). In fact, this system that has arisen as ‘the de facto standard procedure in the WTO’ itself sprouted organically from nebulous procedural guidelines and the unique conditions of WTO proceedings.139 Witness conferencing is already apparently on the rise.140 Other expert witness procedures may also evolve in international arbitration given its similarly flexible procedures and continued efforts to find efficiencies.

134   See CIArb, Practice Guideline 10:  Guidelines on the use of Tribunal-Appointed Experts, Legal Advisers and Assessors (2011), ; CIArb, Protocol for the Use of Party-Appointed Experts in International Arbitration (2007), . 135   See CIETAC Arbitration Rules, art. 42(3) (2012); Justin D’Agostino, ‘Key changes to the CIETAC Arbitration Rules’, Kluwer Arb. Blog, 11 Apr. 2012, . 136  See ICC Rules for Expertise (2003). 137  See Nils Schmidt-Ahrendts, ‘Expert Teaming—Bridging the Divide between Party-Appointed and Tribunal-Appointed Experts’, 43 Victoria U. Wellington L. Rev. 653 (2012); Klaus Sachs and Nils SchmidtAhrendts, ‘Protocol on Expert Teaming: A New Approach to Expert Evidence’, in Albert Jan van den Berg (ed.), Arbitration Advocacy in Changing Times (15 ICCA Congress Series, 2010, Kluwer 2011) 135, 145; J. Martin Hunter, ‘ “Experts” in International Arbitration’, Kluwer Arb. Blog, 7 Feb. 2011, . 138  See Sachs and Schmidt-Ahrendts, ‘Protocol on Expert Teaming’, 145; J. Martin Hunter, ‘ “Experts” in International Arbitration’, Kluwer Arb. Blog, 7 Feb. 2011, . 139  See Foster, Science and the Precautionary Principle in International Courts and Tribunals 114. 140  See, e.g., Caratube Int’l Oil Co. LLP v Kazakhstan, ICSID Case No. ARB/08/12, Award (5 Jun. 2012), para. 72; Libananco Holdings Co. Ltd. v Turkey, ICSID Case No. ARB/06/8, Award (2 Sep. 2011), para. 50 (using witness conferencing under IBA rules and CIArb rules). See also Foster, Science and the Precautionary Principle in International Courts and Tribunals 123–24 (‘[I]‌n 2009 [expert conferencing] was described as the normal method for examining experts [in international arbitral proceedings] and greater use of the same procedure for taking evidence from non-expert witnesses of fact was being encouraged.’); Michael Hwang, ‘Witness Conferencing and Party Autonomy’, 7(1) Transnat’l Disp. Mgmt. 19 (2010), .

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Experts, Partisans, and Hired Guns 2.  Efforts to clarify standards for expert ethics 4.59 Like rising consciousness about the costs associated with ambiguity about counsel ethics,

there is an increased recognition that the absence of regulation regarding expert ethics may increase the costs and reduce the accuracy and efficiency of arbitral proceedings. As a result, calls for and efforts at reform have increased.

4.60 Although ostensibly evidentiary rules, not ethical rules, the IBA Evidence Rules have

attempted to take on this challenge. The drafters of the IBA Evidence Rules expended significant effort on expert witnesses, dedicating separate articles to party-appointed experts (Article 5) and tribunal-appointed experts (Article 6). These new articles contribute some measured progress in delineating the distinction between party-selected and tribunal-appointed experts. Ultimately, however, the Rules may do more to highlight problems than to resolve them. They also make assumptions and impose obligations that will likely have to be reconsidered in subsequent revisions to the Rules.141 a.  Disclosure obligations under the IBA evidence rules

4.61 The first point of concern involves the unequal, and arguably inverted, disclosure obliga-

tions imposed on different types of experts. Under Article 5 of the IBA Rules of Evidence, party-selected experts are specifically required to state their ‘present and past relationship (if any) with any of the Parties, their legal advisors and the Arbitral Tribunal‌’.142 Curiously, there is no similar disclosure obligation imposed on tribunal-appointed experts. This omission is surprising because the Rules confer on tribunal-appointed experts powers that are analogous to, and even commensurate with, those of the tribunal. For example, the tribunal-appointed expert has the power to request and access information, and the expert’s authority to do so is described as ‘the same as the authority of the Arbitral Tribunal’.143 How can an expert have powers similar to the tribunal but not be subject to disclosure qualifications to ensure that those powers are exercised in a fair and equitable manner?

4.62 While disclosure obligations are limited to party-selected experts, both party-selected and

tribunal-appointed experts are required to submit a statement of their ‘independence from the Parties, their legal advisors and the Arbitral Tribunal’.144 This statement of independence seems reasonable as a requirement for tribunal-appointed experts, but further emphasizes the oddity of not requiring separate disclosure. A tribunal-appointed expert may have some ‘present or past relationship’ that would be disclosable under the standard announced in Article 5.2(a) for party-selected experts, and presumably should be disclosed. That same information may not be sufficient to preclude a tribunal-appointed expert from acting independently and therefore may not be deemed sufficient to interfere with submission of the

141  ‘The process of selecting, educating and paying a party-appointed expert creates an environment that inherently puts pressure on the expert’s independence.’ Kantor, ‘A Code of Conduct of Party-Appointed Experts in International Arbitration—Can One Be Found?’ See also George C. Harris, ‘Testimony for Sale – The Law and Ethics of Snitches and Experts’, 28 Pepp. L. Rev. 1, 3 (2000) (‘Despite the obvious incentives for perjury and tailored testimony, [the] justice system accepts payments to [expert] witnesses. . . as justifiable and necessary.’). 142  IBA Evidence Rules, art. 5.2(a) (2010). 143  IBA Evidence Rules, art. 6.3. Notably, the IBA Rules also provide that the expert report any non-compliance by a Party with an appropriate request and its effects on determination of an issue, presumably so that the tribunal cannot only take non-compliance into account in assessing the issue, but potentially also when assessing costs or other sanctions for non-compliance. For further discussion of this issue with regard to the sanction power of tribunals, see Chapter 6. 144  IBA Evidence Rules, arts. 5.2(c) (party-appointed experts) and 6.2 (tribunal-appointed experts).

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Expert witnesses in international arbitration requisite statement of independence.145 For example, what if a tribunal-appointed expert were testifying in other cases before members of the same arbitral tribunal on similar issues? Or if the tribunal-appointed expert had been appointed several times in the past year by one of the parties’ law firms? Why should such information be required to be disclosed by a party-selected expert, but not a tribunal-appointed expert? To the extent that party-selected experts’ disclosure obligations are important to reveal a suspected intellectual tilt, why is the same information deemed irrelevant for those experts who are presumed to have no tilt? This incongruence is especially peculiar given that disclosure of information by a 4.63 party-selected expert is arguably less critical. For party-selected experts, other protections exist to test their credibility, such as cross-examination and the substantive testimony of an opposing party-selected expert. Apart from the IBA Evidence Rules, disclosure of conflicts of interest is a potential reform 4.64 that has been suggested to clarify expert witness’ independence and potential influences.146 Experts should be and generally are required to disclose their level of compensation and the number of repeat engagements for a particular party, law firm, or professional perspective. Some industry regulations also require disclosure of conflicts of interest. Consistent with the general focus of industry-based regulations, those requirements are usually aimed at the conduct of experts in their primary professional occupation, not when they are ‘moonlighting’ as expert witnesses.147 Moreover, overly rigorous expert disclosure of potential conflicts of interest may not be a cure-all and can potentially be counterproductive. In one study, experts required to disclose conflicts of interest were less accurate in their expert advice, ‘perhaps because the disclosure made experts feel some sense of “moral license” ’.148 Even if not a panacea, disclosure of potential conflicts is an important means of increasing transparency, which may in turn press parties to be more careful in selecting experts who are free from obvious and discrediting conflicts. b.  Obligation of independence The IBA Evidence Rules also impose what purports to be a uniform duty of ‘independence’ 4.65 on both party-selected and tribunal-appointed experts.149 In this respect, the IBA Evidence Rules are not unique. For example, the Protocol for the Use of Party-Appointed Expert Witnesses in International Arbitration developed by the Chartered Institute of Arbitrators provides that: ‘An expert’s opinion shall be impartial, objective, unbiased and uninfluenced by the pressures of the dispute resolution process or by any party.’150 Similarly, the IBA Rules purport to apply the same obligation of ‘independence’ to both party-selected and tribunalappointed experts.

145  The inherent ambiguity of ‘independence’ as applied to experts is discussed in the next section. This ambiguity is particularly troubling since a tribunal-appointed expert may decide, even in good faith, that previous repeat appointments by a law firm would not interfere with an ability to render independent expert evidence in a new case. That assessment, however, might not be readily acceptable to an opposing party (or the tribunal) were it disclosed in advance. 146  See, e.g., Robertson, ‘Blind Expertise’, 190–4; Daylian M. Cain et al., ‘The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest’, 34 J. Legal Stud. 1 (2005). 147  See paras 4.04–4.05. 148  Robertson, ‘Blind Expertise’, 190. 149  See IBA Evidence Rules, art. 5 (2)(c) (party-selected experts) and art. 6(2) (tribunal-appointed experts). 150  See Chartered Institute of Arbitrators, Protocol for the Use of Party-Appointed Expert Witnesses in International Arbitration, art. 4(1).

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Experts, Partisans, and Hired Guns 4.66 The phrase ‘independent party-selected arbitrator’ sounds more like an oxymoron than a rea-

sonable aspiration. Almost definitionally, a party-selected expert is not ‘independent’ of the selecting party, at least not in the same way that a tribunal-appointed expert is expected to be ‘independent’. Party-selected experts are compensated by the one party. They receive instructions from and engage in extended communications with the counsel for that party. They testify or submit reports ‘on behalf of ’ or ‘in support of’ that party’s case and they are crossexamined only by the opposing party. In light of these factors, a party-selected expert cannot be considered ‘independent’ in the same sense that the term is generally used with respect to tribunal-appointed experts, or other professionals to whom the same term is applied.

4.67 Even if the IBA Evidence Rules ascribe an inconsistent and muddled meaning to the term

‘independent’, in some respects, the drafters were only replicating a problem that already exists in other contexts. First, there is an apparent analogy between party-appointed arbitrators and party-selected experts. Under most arbitral rules, all members of an arbitral tribunal, including party-appointed arbitrators, must sign a statement or otherwise attest to their independence from the parties.151 Many sources that regulate arbitrator conduct also underscore that party-appointed arbitrators are bound by the same ethical standards—including a duty of independence—as arbitral chairpersons. As examined in greater detail later in Chapter 8, however, key differences exist between party-appointed arbitrators and chairpersons that directly affect the nature of their independence obligations.

4.68 Even if there are interesting comparisons between party-selected experts and party-appointed

arbitrators, there are also important differences. A party-appointed arbitrator’s obligation of independence generally precludes compensation by only one party (though some rules, such as the American Arbitration Association (AAA) and International Centre for Dispute Resolution (ICDR), permit the practice). Meeting ex parte with only one party is generally regarded as incompatible with an arbitrator’s obligation of independence. Under the historic US practice of highly partisan party-appointed arbitrators,152 some courts reasoned that ex parte communications, non-disclosure of conflicts, and even unilateral compensation were permissible for party-appointed arbitrators.153 In those circumstances, courts reasoned that such conduct was permissible because those highly partisan party-appointed arbitrators were not expected to be independent of the parties.154 As described in Chapter 8, this US practice is

151  See, e.g., London Ct. of Int’l Arb. Arbitral Rules, art. 5.2 (‘All arbitrators conducting an arbitration under these Rules shall be and remain at all times impartial and independent of the parties; and none shall act in the arbitration as advocates for any party.’). 152  As described in earlier chapters, historically, the normal US domestic practice was to have highly partisan party-appointed arbitrators, who met and communicated regularly with the parties and counsel who appointed them. See, e.g., Sunkist Soft Drinks, Inc. v Sunkist Growers, Inc., 10 F.3d 753, 759 (11th Cir. 1993) (finding no prejudicial misconduct despite finding that party-arbitrator met with representatives and witnesses of appointing party before arbitration to plan strategy). 153  See, e.g., Rios v Tri-State Ins. Co., 714 So. 2d 547, 549 (Fla. Dist. Ct. App. 1998) (allowing unilateral contingent fee arrangement between party and party-appointed appraiser/arbitrator when the arbitration contract stated ‘[e]‌ach appraiser shall be paid by the party selecting that appraiser’); Hozlock v Donegal Companies/ Donegal Mut. Ins. Co., 745 A.2d 1261, 1262 (Pa. Super. Ct. 2000) (same). See also AAA/ABA, Code of Ethics for Arbitrators in Comm’l Disps., Cannon III(B)(3) (2004), (‘[E]ach party-appointed arbitrator may consult with the party who appointed the arbitrator concerning arrangements for any compensation to be paid to the party-appointed arbitrator. Submission of routine written requests for payment of compensation and expenses in accordance with such arrangements and written communications pertaining solely to such requests need not be sent to the other party.’). 154  See Sphere Drake Ins. Ltd. v All Am. Life Ins. Co., 307 F.3d 617, 620 (7th Cir. 2002) (‘[I]‌n the main partyappointed arbitrators are supposed to be advocates.’); United Transp. Union v Gateway W. Ry. Co., 284 F.3d 710,

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Expert witnesses in international arbitration now largely discredited and mostly abandoned. US party-appointed arbitrators now generally abide by rules that forbid such on-going ex parte communications and instead require independence.155 The reasoning of these earlier decisions, however, is helpful to understanding why party-selected experts are not ‘independent’. For party-appointed arbitrators, abstaining from ex parte communication is one of the hallmark distinctions between those who are independent and those who are not. Since party-selected experts are selected and compensated by only one party and expected to coordinate and communicate with appointing parties and their counsel, they could not meet this hallmark of ‘independence’, at least not in the same sense that that word is used to describe party-appointed arbitrators. To avoid this illogical application, it could be argued that Article 5’s statement of independ- 4.69 ence for party-selected experts should be interpreted as an expression of the expectation that all experts, regardless of how appointed, will bring to the issues of their expertise ‘independent professional judgment’.156 While the independence or ‘objectivity’ of expert opinions will be discussed in greater detail later in the chapter, the text of Article 5 does not readily lend itself to this interpretation. Article 5 does not use ‘independent’ as a modifier for the party-selected expert’s judgment, testimony, or opinion. Instead, it refers to party-selected experts’ status in relation to the parties who appoint them. In this regard, the term ‘independent’ is used exactly as it is with respect to tribunal-appointed experts in Article 6 of the IBA Evidence Rules, and in the same manner as it is generally applied to members of the arbitral tribunal.157 While it might be hoped, expected, and generally desirable to encourage party-selected experts to exercise independent professional judgment, simply requiring them to state (inaccurately and disingenuously) that they are ‘independent’ of the parties, counsel, and the tribunal does not accomplish that aim. It may even undermine that goal by forcing an illogical recitation that is contrary to their actual status and practice. The general statement of independence, as imposed by the new IBA Evidence Rules, may 4.70 not be a meaningful solution as applied to party-selected experts. There are, however, some procedural innovations that aim at a similar outcome and may have a better chance of ensuring more reliable expert witness testimony. 3.  Proposals for expert witness ‘oaths’ In light of recent reforms in national systems such as England, Canada, and Turkey158 that 4.71 require experts to swear oaths, some international arbitration commentators have argued that this obligation could be a useful innovation to adopt in international arbitration.159 711 (7th Cir. 2002) (‘[T]he party members of the panel are expected to vote in accordance with their principals’ wishes[.]’). 155  See AAA/ABA, Code of Ethics for Arbitrators in Comm’l Disps., Canon III.B (2004). 156  For example, when scholars talk about independence in relation to expert witnesses, they say that an expert has an obligation ‘to approach every question with independence and objectivity’. Steven Lubet, ‘Expert Witnesses: Ethics and Professionalism’, 12 Geo. J. Legal Ethics 465, 467 (1999). 157  The term ‘independent’ is used when there are ‘relationships between an arbitrator and one of the parties, or with somebody closely connected with one of the parties’. IBA, Rules of Ethics for Int’l Arbitrators, art. 3.1 (1987). The ‘relationships’ that might interfere with an arbitrators ‘independence’ include if an arbitrator were paid by only one party, or engaged in ex parte communications with a party regarding their case strategy. 158  See Murat Ozsunay, ‘Turkish National Report’, in Storme et al, Civil Procedure in Cross-Cultural Dialogue 316, 323 (citing Turkish Code of Civil Procedure, No. 6100, Official Gazette 04.02.2011, No. 27836 (2011); Turkish Code of Criminal Procedure, No. 5271, Official Gazette: 17.12.2004, No. 25673 (2004)). 159  Kantor, ‘A Code of Conduct of Party-Appointed Experts in International Arbitration—Can One Be Found?’ 201 (‘The format of the oath or affirmation often administered in US domestic arbitrations (“Do

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Experts, Partisans, and Hired Guns Despite the apparent appeal, oath-swearing alone (at least as is typically done just prior to testimony) is not likely to provide a meaningful solution. As a threshold matter, some national laws do not permit arbitrators to administer oaths in arbitral proceedings that are seated in those jurisdictions.160 As a result, oath-swearing could not be a universally available reform. At a more fundamental level, expert witness oaths would have certain limitations as compared to fact witness oaths, which may make them less effective. 4.72 Some national judicial systems require experts to take an oath, similar to fact witnesses,

to tell ‘the truth’. Since an expert witness’s most critical testimony is often in the form of opinion, however, the basic true-false dichotomy addressed by fact witness oaths are not easily applied, either as a conceptual or a practical matter. An opinion can be unreasonable, unfounded, unsupportable, and unconventional.161 An opinion cannot, however, be ‘false’, at least not in the same way that a statement of fact can be false.162 As discussed in greater detail later,163 it is much more difficult to regulate the unreasonable, unfounded, unsupportable, or unconventional than it is to regulate simple falsehoods.

4.73 Generally, the deterrent effect of an oath lies primarily in the threat of prosecution for per-

jury. As a legal matter, however, many national laws are relatively tolerant when it comes to potential punishment for witness perjury, particularly in international arbitration.164 Many systems simply do not extend their perjury laws to witnesses in international arbitration.165 Even in those jurisdictions whose law technically extends to witnesses in international arbitrations, national prosecutors have little interest in chasing down errant witnesses who made alleged misstatements in exotic proceedings that are detached from their national legal system. The general reluctance of national prosecutors to pursue criminal investigations for conduct in international arbitrations is probably best demonstrated by the unwillingness of Swiss prosecutors to investigate rather sensational allegations of fraud and misrepresentation in a very highly publicized case in which counsel and parties apparently falsely accused you swear to tell the truth, the whole truth and nothing but the truth”) arguably establishes a complete range of ethical duties for all witnesses, enforceable by the prospect of a criminal or civil perjury claim when breached.’). 160  Many countries, such as Sweden, do not permit arbitrators to swear witnesses. See W. Laurence Craig et al., International Chamber of Commerce Arbitration, 2nd edn., (1990) § 25.01. 161  In this respect, expert opinions are often determined to be not credible. The problems are that there is no sanction (other than reputation) for rendering an opinion that is not credible and it is costly for the decisionmaker to determine that an expert opinion is not credible. 162  Of course, in testifying, experts also may make statements of fact, which can be true or false. Moreover, an opinion rendered in a proceeding that was not sincere and was contrary to an expert’s actual belief at the time of testimony would come close to false opinion, but such subjective proof is usually difficult to come by. 163  See paras 4.74–4.81. 164  See A. J. van den Berg (ed.), International Commercial Arbitration: Important Contemporary Questions (2003) 283–84 (discussing perjury laws and their application to arbitration proceedings in England, Switzerland, Austria, and the United States); Roth, ‘False Testimony in International Commercial Arbitration’ 149–50. This apparent tolerance is most likely linked to the notion that in many civil law systems, oral witness testimony is not a primary source of evidence. In fact, many systems effectively presume disingenuous testimony from parties or persons with a potential interest in the outcome and thus preclude them from testifying altogether. See Damaska, ‘The Uncertain Fate of Evidentiary Transplants’, 842–43 (‘In most continental jurisdictions, a litigant’s statement is not a recognized means of proof of his allegations. In others, judges are expected to order formal interrogations of a party only as a means of last resort—if other evidence appears insufficient.’). 165  See Roth, ‘False Testimony in International Commercial Arbitration’ 156–9 (English laws against perjury do not extend to international arbitration, but Swiss laws do).

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Expert witnesses in international arbitration esteemed members of an arbitral tribunal of accepting bribes.166 Prosecutions based on conduct in international arbitrations, however sensational, are exceedingly rare and improbable, even for factual witnesses.167 Prosecution for allegedly perjurious testimony by an expert witness presents an even greater 4.74 challenge, even if national prosecutors could be prompted to intervene. First, as already noted, expert witnesses present their most salient testimony as ‘opinion’, not ‘fact’. Second, expert opinions are usually based on complex analysis of a specialized field of study. Indeed, the entire reason to procure an expert is to assist the decisionmaker in resolving a question that is so complex as to require specialized training and experience. Both of these factors make it exceedingly difficult to prosecute expert witnesses for allegedly perjurious testimony. Since, epistemologically, expert knowledge is not simply true or false in the same way that 4.75 factual knowledge is, its accuracy must be broken down into three component parts: belief, truth, and justification.168 As one scholar explains: Belief is a person’s subjective position concerning the truth of a proposition. Truth is the reality of the proposition independent of belief. Justification involves the quality of the reasons for a belief. To count as knowledge, something must be believed as true, it must be true, and a person’s belief that it is true must be justified. In the absence of a belief, what we have is ignorance. In the absence of truth, what we have is error. In the absence of appropriate justification, what we have is mere opinion.169

In other words, a fact witness testifies regarding the truth of a factual proposition. By contrast, an expert witness testifies regarding his or her belief regarding the truth of an underlying proposition. Given the nature of expert witness testimony, it is treated as legitimate, meaning it can 4.76 be treated as scientific knowledge, if it is justified. A court or arbitral tribunal ultimately must decide for itself the truth of the underlying proposition and, as already noted, many national laws prohibit tribunals from substituting expert opinion for their own legal decisions. An expert is not testifying regarding the truth or falsity of the underlying proposition, but instead only regarding the expert’s belief which is presumably justified by the expert’s knowledge of the field and careful study of the problem. In other words, an expert testifies as to a belief and gives reasons why that belief is justified. The adjudicator must ultimately decide the truth of the proposition. Even if the two essential elements of expert testimony—sincere belief and effective justification— 4.77 are lacking, prosecution for perjury would still be exceedingly difficult.170 On the one hand, an   See Gulf Petro Trading Co. v Nigerian Nat. Petroleum Corp., 512 F.3d 742 (5th Cir. 2008).   See Richard M. Mosk, ‘Attorney Ethics in International Arbitration’, 5 Berkeley J. Int’l L. Publicist 32, 33 (2010). 168  Sanders, ‘Expert Witness Ethics’, 1541. 169  Sanders, ‘Expert Witness Ethics’, 1541. 170  In addition to being difficult to prosecute for perjury, expert witnesses generally enjoy immunity for their testimony and submissions in court. See Andrew Jurs, ‘The Rationale for Expert Witness Immunity or Liability Exposure and Case Law Since Briscoe: Reasserting Immunity Protection for Friendly Expert Witnesses’, 38 U. Mem. L. Rev. 49, 51–2 (2007). See also Randall K. Hanson, ‘Witness Immunity Under Attack: Disarming “Hired Guns”’, 31 Wake Forest L. Rev. 497, 497–8 (1996). There are a few potential exceptions when expert testimony involves the collateral exercise of expert duties other than that of the witness, which may be subject to general malpractice standards. There have also been some cases in which a party’s own expert has been held liable for malpractice for changing testimony. See, e.g., Michael T. Nelson, ‘Pace v Swerdlow: Can Expert Witnesses 166 167

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Experts, Partisans, and Hired Guns expert can have a belief that is sincere, but false. For example, not only did ‘scientific experts’ in Galileo’s era (today, we would call them ‘church officials’ or ‘religious scholars’) sincerely but inaccurately believe that the sun travelled around the earth, but also that the geocentric theory of celestial bodies was an inalienable epistemological ‘fact’. At Galileo’s trial, if an expert had testified to that sincerely held belief, the expert could not be prosecuted under modern perjury statutes, even though they were completely wrong about the underlying proposition.171 4.78 In modern times, the main critique of expert witnesses is that the beliefs they espouse are

insincere, not sincere but mistaken. It would, however, be equally unlikely to have an insincere belief satisfy the modern elements for criminal perjury. Apart from the problems of proving a mental state like insincerity, the modern elements of criminal perjury usually require the defendant 1) be under oath during testimony, 2) make a false statement, 3) make a false statement with knowledge of its falsity, and 4) the false statement must be material to the proceedings.172 Falsity and knowledge of falsity are not standards that fit easily with the nature of expert opinion testimony.

4.79 Another prevailing modern critique of expert witnesses is that even if they sincerely believe in

an underlying proposition (or that belief is not easily challenged), that apparent belief is not justified. Such testimony might be reckless and illegitimate. It would be difficult, however, to characterize even reckless testimony as ‘perjurious’, at least in the modern sense of the term. For example, a gambler may have a vehement belief that his lucky number is going to come up on the next spin of the roulette wheel. The gambler may end up being right (and win a lot of money). That outcome, however, would not be the product of ‘knowledge’, despite the gambler’s sincere belief that he ‘just knew’ his number was going to come up.173

4.80 The reason this analogy may seem implausible in comparison to expert testimony is because,

even to a layperson, the mechanism of the roulette wheel and the odds of a selected number

Face Liability for Changing Their Minds? The Tenth Circuit Weighs in on the Element of Proximate Cause in A Claim of Expert Negligence’, 86 Denv. U. L. Rev. 1199 (2009). 171   See John Macdonell, ‘Galileo’, in Historical Trials (1927) 109, 117–8 (reproducing in respect to the first trial of Galileo the Assessor’s testimony that Galileo’s central premises were not believable, but actually heretical). It is noteworthy that no one involved in Galileo’s trial disputed the truth of the geocentric theory in court, not even Galileo. At the time, the geocentric theory was considered a fact, and belief had nothing to do with it. For instance, a letter written by Bellarmine was cited by Galileo in his own defence against the specific injunction during the trial as key evidence. The letter stated, inter alia: ‘Only the declaration made by the Holy Father and published by the Sacred Congregation of the Index has been revealed to [Galileo], which states that the doctrine of Copernicus, that the earth moves around the sun and that the sun is stationary in the center of the universe and does not move east to west, is contrary to the Holy Scripture and therefore cannot be defended or held.’ Richard J. Blackwell, Behind the Scenes at Galileo’s Trial (2006) 9, 3–27. See also Foster, Science and the Precautionary Principle in International Courts and Tribunals 10 (discussing how science is socially and legally constructed and that all scientific assertions may be discarded). 172  See 18 USC.A. §§ 1621, 1623. See also US Dept. of Justice, United States Attorneys’ Manual:  Title 9: Criminal Resource Manual (1997), 1744–8, . 173  This excellent example comes from some of the top thinkers in this field in the US. As Joseph Sanders explains: ‘Even correct beliefs without appropriate justification are not knowledge. The gambler’s fallacy provides an example. When playing roulette, the gambler observes that his favourite number has not come up for a very long time. He believes it is “due” and bets on it. He wins. He was right in his belief about the number coming up, but for the wrong reasons. [The gambler]. . . may say: “I just knew it would win.” But [he] didn’t really know. [He] was convinced and [he] turned out to be right. That is all.’ Sanders, ‘Expert Witness Ethics’ 1541 (internal citations omitted) (citing and quoting Michael Williams, Problems of Knowledge: A Critical Introduction to Epistemology (2001) 16–9).

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Procedural reforms and the panda’s thumb coming up are both well known. These well-known facts make the probability of the lucky number actually coming up easily verifiable. As a result, the absence of justification seems obvious. With most expert testimony, the absence of justification is more difficult to discern because the underlying proposition is less certain and the methodology used by experts is more opaque to laypersons than the mechanics of a roulette wheel. These circumstances make the absence of justification a difficult predicate for a perjury charge. While perjury charges against expert witnesses are almost unheard of, admissibility standards 4.81 can preclude the introduction of frivolous expert testimony. In most United States jurisdictions, scientific expert testimony is admissible only if it satisfies the so-called Daubert standard, which requires a judge to act as a gatekeeper in determining whether expert testimony proceeds from ‘scientific knowledge’ and is based on sound scientific methodology before they deem it admissible.174 Admissibility standards can play a meaningful role by excluding from evidence expert testimony that is not founded on sound methodology—in other words not justified. These standards generally only exclude questionable categories of expert testimony, however, and do not screen out flimsy opinions issued within a legitimate category of scientific evidence.

C.  Procedural reforms and the panda’s thumb The Functional Thesis, developed in greater detail in Chapter 7, posits that the procedures in 4.82 any adjudicatory setting portend the functional inter-relational roles of particular actors, such as expert witnesses. These inter-relational functional roles, in turn, establish a particular range of ethical obligations and limitations that further fulfilment of specific actors’ (in this case, expert witnesses’) role and help identify the factors to be taken into account in making ethical decisions. The Functional Thesis holds two important insights for expert ethics. On the one hand, tribunal-appointed and party-selected experts have different 4.83 inter-relational roles with respect to tribunals, parties, and counsel. The functional role of the tribunal-appointed expert is to assist the tribunal directly and, in this role, to prepare an expert opinion in a manner that is financially and operationally separate from the parties, and may even include tribunal-like powers over the parties. For this reason, the ‘independence’ required of a tribunal-appointed expert precludes the expert from accepting money from only one party or meeting privately with counsel for one party. The functional role of the party-selected expert, by contrast, is to develop expert evidence 4.84 based on information provided by one party and in coordination with party’s counsel. This role also explicitly contemplates that the expert will accept money from and engage in communications with the counsel of only one party, and only be cross-examined by the other party’s counsel. These activities are part of the functional role contemplated for a partyselected expert. Varied roles necessarily mean varied ethical obligations. The role of a partyselected expert is not consistent with the obligation of ‘independence’ that is imposed on the very different role of tribunal-appointed expert witnesses. International arbitration employs both types of experts, but separated from the national legal 4.85 traditions in which they normally operate. This mix-and-match approach means that expert 174  The standard is named for the case in which the test was announced: Daubert v Merrell Dow Pharm., 509 US 579 (1993).

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Experts, Partisans, and Hired Guns witnesses’ functional roles are not necessarily familiar to all participants. The earlier discussion of the IBA Evidence Rules demonstrated that international arbitration has not clearly delineated the distinct ethical obligations that apply to party-selected experts in contrast to tribunal-appointed experts. These distinctions are all the more important when parties, counsel, and arbitrators do not have shared intuitions and assumptions about what constitutes proper conduct. 4.86 In addition to mixing-and-matching the two archetypes of expert witnesses, interna-

tional arbitration has also been at the forefront of procedural innovations with respect to expert witnesses, which can further confuse their roles. As described in paras 4.39–4.41, international tribunals also permit development of hybridized inter-relational roles for expert witnesses. As noted, the ICJ has allowed expert witnesses to combine their function with either advocates or tribunal members. Confusion about the nature of these hybridized roles has, in turn, led to confusion about their ethical obligations. Similarly, witness hot-tubbing and witness conferencing can allow tribunals and parties to streamline the otherwise drawn out process of sequential and often contradictory expert testimony. In creating certain efficiencies, these procedures also shapeshift the inter-relational functional roles of expert witnesses by forcing them to interact directly. This new functional role, in turn, potentially raises new issues about their ethical obligations in participating in these processes.

4.87 Donald Elliott has analogized procedural innovations to the panda’s thumb, an evolu-

tionary development that allows an otherwise clumsy paw to efficiently strip shoots off bamboo.175 Similarly, Elliott argues, procedural innovations are often creative evolutionary adaptations that allow new functions that are needed but unaccommodated by a system’s traditional structure.176 Functional roles are sensitive to evolutionary pressures because they are inherently utilitarian. They are driven by pragmatism and often occur on an ad hoc basis. Ethical assumptions and expectations, however, are more constant over time. New roles may portend new ethical obligations, but those new obligations may not be readily accepted as legitimate. Even as the original role to which those obligations were tethered has slipped from its moorings, actors whose role has shifted and those who interact with them in arbitral proceedings may retain background assumptions about what constitutes proper professional conduct.

4.88 This observation about the potential separateness in evolution of inter-relational roles and

attendant ethical obligations accounts for some of the confusion that has occurred in particular cases, described later. The resulting confusion cannot be cured with new labels, such as ‘independent’, or quick fixes. They require integrated reassessment of ethical obligations in light of clearly defined inter-relational roles, a topic explored later in Section 1. Even with clear role definition, expert witnesses present unique challenges for effective ethical regulation. As examined in greater detail in Section 2, some of the most effective means of regulating their integrity and professionalism may not be ethical rules at all, but instead checks that structurally corral potential excesses. 175  The analogy of a panda’s mock ‘thumb’ to civil procedure innovations was introduced by E. Donald Elliott, ‘Managerial Judging and the Evolution of Procedure’, 53 U. Chi. L. Rev. 306, 307 (1986) (citing Stephen Jay Gould, The Panda’s Thumb: More Reflections in Natural History (1980) 21–24 for the metaphor). 176  Although Elliott made this observation about innovations in US judicial procedures, it is especially pertinent with respect to recent procedural innovations regarding expert witnesses in international arbitration.

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Procedural reforms and the panda’s thumb 1.  Clearer role definition Two archetypes for expert witnesses, tribunal-appointed experts and party-selected experts, 4.89 derive from national legal traditions. Under the Functional Thesis, each archetype can permit a range of legitimate conduct that is tied to the differing legal cultures and the inter-relational roles they impose among parties, counsel, and experts. Within the permissible range of conduct, expert witnesses also inevitably bring their own personal predilections. For example, some party-selected experts might be more accustomed to frequent communications with counsel during the process of writing an opinion, while others may have a personal preference or established practice of more limited communications. Despite room for flexibility within the two archetypes, problems can arise if an expert witness accustomed to operating under one archetypal role is suddenly recast in another. Alternatively problems can arise if their underlying role becomes blurred, particularly as between the two archetypes. In this latter situation, existing ambiguities about the permissible range of conduct for experts becomes even more difficult to discern. Existing uncertainties about appropriate ethical obligations for party-selected experts reflect, 4.90 and even contribute to, confusion about the role of party-selected experts in certain contexts. For example, in the CME-Czech Republic case, allegations were raised that a party-retained expert on Swedish arbitration law crossed an ethical line by acting as de facto co-counsel, actively participating in arguments, instead of as a detached expert.177 Experts on law present unique questions about the role of expert witnesses. National court proceedings rarely permit ‘experts’ on law.178 Instead, judges are generally presumed to be competent in their own legal system and are charged with discerning the law.179 Perhaps as a consequence, there are no well-developed traditions about where to draw the line between advocacy and opining on legal advice. Whatever the line, critics of the expert’s conduct in the CME-Czech case clearly believe participation in oral arguments is outside the appropriate boundaries even if there is no clear guidance on this issue. In other examples, the basic role of the expert witness, as either party-appointed or tribunal- 4.91 appointed, has been scrambled. The result of this scrambling of roles is that the uncertain range of permissible conduct becomes even more uncertain. For example, in the International Centre for Settlement of Investment Disputes (ICSID) award SOABI v Senegal, consistent with German procedures, the tribunal appointed its own expert. It also, however, imported several aspects of US procedures, including some that pertained to the expert witness’s conduct and preparation. For example, the expert was allowed to consider information provided directly by one party, SOABI, without an opportunity for Senegal to challenge its accuracy. On several occasions, the expert was even allowed to meet ‘with SOABI and in the absence 177  See Email from Tore Wiwen-Nilsson (7 Feb. 2006) (on file with author); CME Czech Republic B.V. v The Czech Republic, UNCITRAL (The Netherlands/Czech Republic BIT) (13 Sept. 2001) (dissenting opinion of the Arbitrator JUDr Jaroslav Hándl against the Partial Arbitration Award), (‘[T]‌he witnesses should be heard as witnesses of the facts . . . [T]his principle was not observed [by the arbitrator] who permitted to the witnesses nominated by the Claimant to present their opinions to individual legal questions, e.g., as a witness was heard the attorney at law of the Claimant, who presented his legal opinions.’). 178  One exception is when foreign law applies. For example, in the United States, under Federal Rule of Civil Procedure 44.1, foreign law is introduced through expert testimony. See also Suzannah Linton and Dr Firew Kebede Tiba, ‘The International Judge in an Age of Multiple International Courts and Tribunals’, 9 Chi. J. Int’l L. 407, 424 (2009) (advocating the use of legal experts in international proceedings). 179  See J-G Castel, ‘Proof of Foreign Law’, 22 U. Toronto L.J. 33, 36–7 (1972).

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Experts, Partisans, and Hired Guns of representatives of the Republic of Senegal’.180 Senegal objected to these meetings, but the tribunal rejected these objections, reasoning that Senegal ‘had every opportunity to challenge such information as well as the Report’s conclusions. . . after receiving its copy from the Tribunal’.181 4.92 Based on the record, it appears that the tribunal permitted the tribunal-appointed expert to

engage in extensive ex parte communications with SOABI. While these meetings would be perfectly normal if the expert were appointed by SOABI, it is highly unusual given that the expert was appointed by the tribunal. The problem is not that the expert’s role was converted to be more akin to that of a party-selected expert; the problem is that the conversion was only partial. The expert apparently retained the status of tribunal-appointed expert (the expert’s report was apparently submitted to the tribunal and only then provided to opposing counsel), but operated functionally more like a party-selected expert. The expert was thus permitted to engage in conduct that might raise questions about his independence or neutrality as a tribunal-appointed expert, but not subject to the procedures that would otherwise apply if he were a party-selected expert. For example, Senegal apparently did not have any opportunity to cross-examine the expert based on the report or to retain an opposing expert to challenge his conclusions. The only remedy proposed for Senegal was that it could somehow challenge the final conclusions of the expert. Such an opportunity is of limited value, however, without any opportunity to determine what information SOABI had provided during the ex parte meetings or to retain its own expert.

4.93 The problems in these cases demonstrate that the vague ethical guidance that exists for

experts is designed around the established party-appointed/tribunal-appointed dichotomy. When these distinct roles are fused or combined, the already-vague standards become more difficult, if not impossible, to apply. These problems are especially acute when the role redefinition is partial, ad hoc, or not clearly articulated in advance.

4.94 Instead of parsing the unique duties that might be tied to distinct roles assigned to expert wit-

nesses, most efforts to address expert ethics have ignored important differences. For example, to avoid potential concerns about differences between party-appointed and court-appointed experts, some commentators have suggested that all experts simply be required to be ‘neutral’ and ‘independent’ and ‘unbiased’.182 This one-size-fits-all approach is effectively what the IBA Evidence Rules, analysed earlier, attempt to do. Just as with arbitrators,183 however, generically applying terms like ‘independence’ for all expert witnesses cannot substitute for the hard work needed to delineate their specific inter-relational roles and consequent ethical responsibilities. Party-selected experts are compensated directly by the party who selected them and communicate directly with counsel about details of the case, including potentially confidential information about the party’s case strategy. This terminological confusion demonstrates that at least some ambiguities about experts’ ethical obligations are tied to a failure to match ethical obligations to their functional roles. If they are functioning in a role

180  See Christoph Schreuer, The ICSID Convention: A Commentary (2001) 661; Société Ouest-Africaine des Bétons Industriels (SOABI) v La République du Sénégal, ICSID Case No. ARB/82/1, Award, ¶ 9.17 (25 Feb. 1988), 2 ICSID Reports 368–9 (1988). 181  Société Ouest-Africaine des Bétons Industriels (SOABI) v La République du Sénégal , ¶ 9.16. 182  For an analysis of this development in judicial contexts, see Sanders, ‘Expert Witness Ethics’, 1580 (remarking on the failure of the Court Appointed Scientific Expert (CASE) programme in the US). 183  See paras 4.67–4.69.

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Procedural reforms and the panda’s thumb that is not actually independent of the parties and their counsel, imposing an ethical duty of ‘independence’ does not provide any meaningful guidance. The question remains, however, how to define their obligations and enforce them. 2.  Oaths and certifications for experts Another purpose of an oath, quite apart from criminal consequences for perjury, is to pro- 4.95 mote responsible testimony by impressing on the witness the moral obligation of truthtelling. The effect of oaths on the truthfulness of testimony seems to be one of very few topics on which there is no expert. As one commentator notes, ‘[s]‌urprisingly, psychologists have never examined whether the oath affects witness’ sincerity’.184 In the absence of direct testing regarding oaths, however, there is more than intuition to suggest the value of oaths on witness behaviour. Social psychologists have done extensive testing of norm salience and its effect on behaviour. 4.96 These studies have found some interesting results, which can be extrapolated to the context of witness oath-taking. For example, in one experiment students were demonstrably more cooperative in a game called ‘Community Game’, than other students when the same game was instead labelled ‘Wall Street Game’.185 Social psychologists conclude from this and other similar studies that situational cues can radically change people’s mental state about what is normatively appropriate in a social context.186 On the other hand, other experiments suggest that the potential benefits of such norm sali- 4.97 ence and norm compliance dissolve quickly when competing interests press on an actor’s immediate incentives. For example, in another study a group of religious ministry students were told that they were late for an extemporaneous talk across campus on the importance of helping those in need. Those ministry students tended not to stop and help a student lying in an overturned wheelchair. Their concern about being late overtook the norm of helping those in need, even if the potential speakers were undoubtedly considering precisely how to express that very norm at the same moment that they walked by the student in need.187 These findings have potentially important implications for how oaths could be effective in adjusting the professional conduct of expert witnesses. Cumulatively, the previously described studies about the effect of norm salience combined 4.98 with earlier observations about the limitiations of oaths suggest potential reforms for international arbitration. First, traditional oaths seem to have limited value in deterring irresponsible expert witness testimony. They are usually framed in stark true-false dichotomies and administered moments before testimony begins. The risk is that an oath applied in this

184  Thomas D. Lyon, ‘Child Witnesses and the Oath: Empirical Evidence’, 73 S. Cal. L. Rev. 1017, 1064 (2000). See also Hugo Munsterberg, On the Witness Stand: Essays on Psychology and Crime (1912) 48. Hugo notes that early in this century Munsterberg offered strong, but mixed opinions on the value of oaths. On the one hand, Munsterberg opined that an oath ‘can and will remove to a high degree the intention to hide the truth’, but on the other hand, noting that witnesses can be inaccurate for reasons other than dishonesty, ‘it may be an open question to what degree [the oath] can increase the objective truthfulness’. 185  Varda Liberman et al., ‘The Name of the Game: Predictive Power of Reputations versus Situational Labels in Determining Prisoner’s Dilemma Game Moves’, 30 Pers. & Soc. Psychol. Bull 1175 (2004). 186  Douglas Kenrick et al., Social Psychology: Goals in Interaction, 5th edn., (2010) 451. 187  John M. Darley and C. Daniel Batson, ‘“From Jerusalem to Jericho”: A Study of Situational and Dispositional Variables in Helping Behavior’, 27 J. Pers. & Soc. Psychol. 100 (1973). For these references, I am truly grateful for guidance from one of the leading experts on experts—Professor Michael Saks.

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Experts, Partisans, and Hired Guns manner may be regarded as an empty and ultimately irrational cultural ritual. As a result, it may be all that much easier to disregard. 4.99 On the other hand, an oath or certification that is substantively meaningful and strategically

imposed to provide a ‘situational cue’ could potentially have more meaningful effects. An oath has more potential to operate as a situational cue when it is connected to larger reforms similar to those implemented in Canada and New South Wales.188 Those reforms enacted a ‘code’ or set of articulated norms regarding an expert’s obligation to aid the court in determining the truth. Those norms are provided to experts by counsel when they initially retain an expert as part of a code of ethics. The expert witness is then required to sign a certificate agreeing to be bound by those norms. These norms are framed in functional terms that seek to revise experts’ functional role by incorporating the oath into an expert witness’s professional undertaking. Oaths administered in this fashion also avoid the conventional true/ false dichotomy that characterizes most oaths. Finally, to the extent the exercise is framed as a certification, it would appear also to avoid the prohibitions that some countries have against arbitrators administering oaths.

4.100 Like the religious ministry students ignoring a disabled student in need, it is of course pos-

sible that these norms may ultimately be ignored by party-selected experts. Nonetheless, having these self-regulated undertakings adopted at the beginning of proceedings, mutually acknowledged by counsel, and framed in more meaningful terms, make it more likely that they will become part of a process of acculturation into the international arbitration community.

4.101 Norms that are part of an acculturation process, as opposed to norms that are simply

recited in an oath right before testimony is given, may be less readily discarded. More practically, early application will ensure they are applicable during the process of preparing reports and coordinating with counsel in anticipation of hearings. This approach to oaths may also put some pressure on counsel to restrain from putting undue pressure on experts to contort testimony. It is difficult, even for the most hardboiled of counsel, to participate in a process of communicating expert obligations and ensuring expert certification, only to turn around and ask an expert to blatantly violate the spirit, if not the letter, of those obligations.

4.102 In addition to using oaths to reacculturate experts, recently introduced structural reforms

may help reorder the role of experts that make it inefficient or counterproductive to provide reckless expert evidence. The theory behind expert conferencing is that the effect

188  See Federal Courts Rules, SOR/98-106, R. 52.2, Form 52.2, sched. (2013) (Can.), ; Rules Amending the Federal Courts Rules (Expert Witnesses), 143 Can. Gazette (17 Oct. 2009), ; Uniform Civil Procedure Rules 2005, R. 31.23 (NSW), : ‘(3) Unless the court otherwise orders, an expert’s report may not be admitted in evidence unless the report contains an acknowledgment by the expert witness by whom it was prepared that he or she has read the code of conduct and agrees to be bound by it. (4) Unless the court otherwise orders, oral evidence may not be received from an expert witness unless the court is satisfied that the expert witness has acknowledged, whether in an expert’s report prepared in relation to the proceedings or otherwise in relation to the proceedings, that he or she has read the code of conduct and agrees to be bound by it.’

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Conclusion of bias caused by attorney coaching can be diminished if experts are immediately confronted with the opinions and questions from peers.189 As one commentator describes, ‘[P]‌eople are less likely to lie in front of their peers’ and other experts are able to ‘identify over-simplifications in expert testimony’.190 In this sense, expert conferencing seeks to have immediate in-person peer review and provides a check on unethical excesses that vague ethical obligations with no meaningful enforcement mechanisms cannot. Like using oaths as acculturation, witness hot-tubbing, witness conferencing, and 4.103 expert teaming all seem to reorient the functional role of expert witnesses. These latter techniques expand expert witness functions beyond simply providing evidence in support of one party’s case to providing a direct check on an opposing witness. Some continue to doubt the efficacy of this new functional role191 while others appear to question whether functional roles can actually be reordered through these techniques.192 The growing interest and use of these techniques, however, suggests that arbitration specialists recognize that simply articulating ethical obligations for expert witnesses that have no means of real enforcement cannot resolve increasing concerns about potential ethical excesses.

D. Conclusion International arbitration is still experimenting with expert witnesses, their functional roles, 4.104 and their ethical obligations. While they suffer from some important shortcomings, the IBA Rules of Evidence are an important first attempt to regulate the conduct of experts. They clarify the distinction between party-selected and party-appointed experts, and attempt to delineate obligations attendant with each type of expert. As procedural innovations become more entrenched practices, they will present new chal- 4.105 lenges in defining experts’ role and delineating the ethical obligations that attend that role. To that end, it is best to avoid the Frankenstein hybrids that combine expert witness functions 189  See Hilmar Raeschke-Kessler, ‘Witness Conferencing’, in The Leading Arbitrators’ Guide to International Arbitration, 2nd edn. (2008) 418–19. 190  See Jeff Waincymer, Procedure and Evidence in International Arbitration (Kluwer, 2012) 968–69, § 12.14.11; Wolfgang Peter, ‘Witness “Conferencing”’, 18 Arb. Int’l 47 (2002) (‘As a matter of fact, it is very difficult for a witness under the gaze of their counterparts to persist in a clearly inaccurate version of the facts. It is also very difficult to stick to a well-prepared but highly subjective line of factual presentation.’). 191  See Born, International Arbitration 170 (‘[W]‌itness-con­ferencing seldom genuinely saves time. On the contrary, witness-conferencing can take more time, because it is often best used in addition to, rather than instead of, traditional cross-examination. This enables cross-examination to identify key areas of disagreement, which can then be focused in a witness conference.’); see also J. Martin Hunter, ‘Expert Conferencing and New Methods’, in Albert Jan van den Berg (ed.), International Arbitration 2006:  Back to Basics? (13 ICCA Congress Series 2006, Kluwer, 2007); Doug Jones, ‘Party Appointed Experts: Can They be Usefully Independent?’ 8(1) Transnat’l Disp. Mgmt. 1, 10–11 (2011); Yuka Fukunaga, ‘Chapter 5: Experts in WTO and Investment Litigation’, in Jorge A. Huerta-Goldman, Antoine Romanetti et al. (eds.), 43 WTO Litigation, Investment Arbitration, and Commercial Arbitration, Global Trade Law Series (Kluwer, 2013) 135, 158; Harris Bor, ‘Chapter 24: Expert Evidence’, in Julian D.M. Lew, Harris Bor, et al. (eds.), Arbitration in England, with chapters on Scotland and Ireland (Kluwer, 2013) 503, 508–09. 192  Antonio Hierro, ‘Reducing Time and Costs in ICC International Arbitration Excess Time and Costs of Arbitration: An Incurable Disease?’ 2012 Spain Arb. Rev. 37, 45 (2012) (arguing witness-conferencing works best when experts come from similar cultures and backgrounds and are not too directly involved as part of the ‘team’ for the case).

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Experts, Partisans, and Hired Guns with the role of advocates or the role of tribunals. These hybrids increase confusion about role and make it more difficult to determine proper professional obligations. 4.106 On the other hand, given the unique nature of expert witnessing, some of the best cures

for the worst abuses require incorporating ethical reforms into structural changes that are directed at reacculturation in more carefully defined roles, such as the requirement that oaths be administered at the commencement of a case.

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5 GAMBLERS, LOAN SHARKS, AND THIRD -PARTY FUNDERS *

ANTONIO: SHYLOCK: ANTONIO: SHYLOCK:

Shylock, although I neither lend nor borrow Sy taking nor by giving of excess, I’ll break a custom. Is he yet possess’d How much ye would? Ay, ay, three thousand ducats. And for three months. I had forgot; three months; you told me so. Well then, your bond; and let me see; but hear you; Methought you said you neither lend nor borrow Upon advantage.**

Throughout much of history, money lending was considered immoral. Money lending to 5.01 facilitate a lawsuit was simply unthinkable. In the search for justice and truth, it was believed that opposing parties should be assisted by professional counsel and funded by their own personal assets.1 The process, in other words, should be untainted by business incentives. Under this view, claim funding by a party who has no relationship to the dispute is at best an unwanted intrusion and at worst a corruption or commodification of justice.2 Even committed, modern capitalists seem ill-at-ease with third-party funding. As one reporter 5.02 from Forbes magazine wrote: ‘Dress it up as you like, there’s something about all this secret meddling in other people’s bitterest disputes and profiting from them that doesn’t sit well.’3 There is, in the words of one commentator, something ‘fishy’, an ‘ick factor’, to third-party funding

*  The author is co-chair of the ICCA-Queen Mary Task Force on Third-Party Funding in International Arbitration. The views expressed in this chapter reflect her own personal perspectives, and are not attributable to the Task Force. **  William Shakespeare, The Merchant of Venice, 3.1. 62–70. 1  In some jurisdictions, lawyers’ assets can be used to finance claims, but for reasons similar to those used to oppose third-party funding, many other jurisdictions find lawyer-funding of claims unpalatable. Marco de Morpurgo, ‘A Comparative Legal and Economic Approach to Third-Party Litigation Funding’, 19 Cardozo J. Int’l & Comp. L. 343, 345 (2011). 2  See W. Bradley Wendel, ‘Alternative Litigation Finance and Anti-Commodification Norms’, 63 DePaul L. Rev. (2013) 655, 657 (describing how ‘[t]‌he wrongful nature of [third-party funding] . . . is related to its transformation of a non-market good, namely civil justice, into something that can be bought and sold like anything else on the market’). 3  Roger Parloff, ‘Have You Got a Piece of This Lawsuit?’ Fortune, 28 June 2011, 68, . 

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Gamblers, Loan Sharks, and Third-Party Funders that does not fit with our conventional views about justice and adjudication.4 For these reasons, third-party funders are often described in unflattering terms, such as ‘vulture investors’,5 ‘Oz-like’ controllers of the arbitral process ‘from behind a curtain’,6 gamblers,7 or loan sharks.8 5.03 Just as Antonio in The Merchant of Venice reconsidered his aversion to lending and borrow-

ing, however, numerous jurisdictions are also reconsidering historic prohibitions against litigation financing. Several factors account for this trend. At the most fundamental level, as the cost of pursuing claims has become prohibitively expensive in some systems, funding from third parties has become a means of facilitating access to justice that would otherwise be out of reach.9 Beyond hapless individuals who cannot pursue personal claims, commercial entities are also increasingly reluctant to tie up precious capital to pursue a claim that may or may not prevail when money can otherwise be invested in other business activities.

5.04 More generally, third-party funding is expanding as part and parcel of a more global and sys-

temic deregulation of the legal profession. To comply with obligations under the General Agreement on Trade in Services (GATS), various national reforms have been allowing lawyers greater flexibility.10 Deregulation in some jurisdictions has fuelled pressure in other jurisdictions to similarly liberalize so that their firms can perform effectively on the world stage.

5.05 As part of these efforts, some jurisdictions have begun expressly permitting law firms to oper-

ate in ‘multi-disciplinary practices’ (MDPs) or Incorporated Legal Practices (IPLs, as they are known in Australia), most typified by the large accounting firms. Consistent with permitting collaboration with non-lawyers in these organizations, Australia and the United Kingdom now also expressly authorize public trading of financial interests in law firms.11 4   Wendel, ‘Alternative Litigation Finance and Anti-Commodification Norms’ note 2; Anthony J. Sebok, ‘The Inauthentic Claim’, 64 Vand. L. Rev. 61, 134 (2011). 5   Mark Kantor, ‘Third-Party Funding in International Arbitration: An Essay About New Developments’, 24(1) ICSID Rev. 65, 66 (2009). 6   Mark J. Goldstein, ‘Should the Real Parties in Interest Have to Stand Up?—Thoughts About a Disclosure Regime for Third-Party Funding in International Arbitration’, 8(4) Transnat’l Disp. Mgmt. (2011), . 7   Jonathan T. Molot, ‘Litigation Finance: A Market Solution to a Finance Problem’, 99 Geo. L. J. 65, 96 (2010) 96 (describing hedge funds as trying to ‘earn returns by betting on litigation’). See also US Chamber Inst. for Legal Reform, Selling Lawsuits, Buying Trouble: Third-Party Litigation Funding in the United States (2009) 4; Kantor, ‘Third-Party Funding in International Arbitration’ 74–5. 8   Douglas R. Richmond, ‘Litigation Funding: Investing, Lending, or Loan Sharking?’ 2005 Prof. Law. Symp. Issues 17 (2005); Kingston White, ‘A Call for Regulating Third-Party Divorce Litigation Funding’, 13 J. L. & Fam. Stud. 395 (2011); Daniel Brook, ‘Litigation by Loan Shark’, Legal Aff. (Sept.–Oct. 2004), . 9   See Richard Happ, Foreword to Lisa Bench Nieuwveld and Victoria Shannon (eds.), Third-Party Funding in International Arbitration (Kluwer Law Int’l., 2012) xix-xxii (‘[O]‌nly one out of five prospective clients has the necessary war chest to finance [international commercial] proceedings. For those parties, third-party financing guarantees access to justice.’); Eric De Brabandere and Julia Lepeltak, ‘Third Party Funding in International Investment Arbitration’, Grotius Centre Working Paper No. 2012/1 (5 June 2012), (‘The most important advantage is that, as a result of the financing, arbitral proceedings that otherwise would be too expensive for certain investors become accessible. This means that access to justice is increased, which gives investors a more equal position with respect to the State.’); de Morpurgo, ‘A Comparative Legal and Economic Approach to Third-Party Litigation Funding’, 381–2; Kantor, ‘Third-Party Funding in International Arbitration’, 73 (‘[P]ermitting third-party funding promotes access to justice. Without such funding, injured parties might be unable, for lack of resources, to pursue meritorious but expensive claims against stonewalling defendants.’). 10   Laurel S. Terry, ‘From GATS to APEC: The Impact of Trade Agreements on Legal Services’, 43 Akron L. Rev. 875, 972 (2010). 11   To date only two law firms, Slater & Gordon and Shine Lawyers, are listed on the Australian Stock Exchange. See Neil Rose, ‘Listed Australian law firm considering UK opportunities’, Legal Futures, 15 Aug. 2013, .

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Gamblers, Loan Sharks, and Third-Party Funders The cumulative effect of trade liberalization in legal services has been more express discus- 5.06 sion and treatment of legal services as an economic venture, not only a sacrosanct ‘profession’ that serves, but stands apart from, the marketplace.12 With the breakdown of the often-artificial line between what constitutes the ‘practice of law’ and law-related business services, it has become easier and more palatable to view legal claims as ‘assets’. Contractual relationships that allow investment in legal claims, under this view, seem less objectionable.13 Inter-jurisdictional competition that had spurred law firms to press for breaking down prohibitions that still exist in some jurisdictions on lawyer–non-lawyer affiliations, now increasingly focuses on historical restrictions on third-party funding.14 In addition to trends within the legal profession, market forces have also contributed to 5.07 increase both demand for and interest in dispute financing. The economic downturn in 2008 pushed many companies into economic dire straits, if not the threat of bankruptcy. They needed to maximize assets, including legal claims, while maintaining cash flows.15 Meanwhile, various economic investment firms are seeking ‘investments that are not directly tied to or affected by the volatile and unpredictable financial markets’.16 At a time when traditional financial markets have proven unstable and returns are down, claim funding is bragging about enviable rates of return. Third-party funders aim for a ‘three times’ return, meaning a return of every dollar invested plus two more dollars.17 When variables in outcomes are taken into account, funders claim upwards of a 100% total return over a five- to six-year period for their investment portfolios.18 For all these reasons, it is perhaps no small wonder that several jurisdictions now allow the 5.08 practice. The United Kingdom and Australia expressly allow, and even glorify, third-party funding.19 Meanwhile, in all civil jurisdictions in Europe, with the exceptions of Greece and

12  David B. Wilkins and Mihaela Papa, ‘The Rise of the Corporate Legal Elite in the BRICS: Implications for Global Governance’, 54 B.C. L. Rev. 1149, 1170–3 (2013). 13  As Bradley Wendel explains, many opponents of third-party funding criticize it as ‘commodifying’ justice by ‘introducing the norms and values of the marketplace into a domain that should be characterized by its separation from the market’. Under this view, third-party funding is ‘objectionable in the same way as prostitution, selling babies, surrogate pregnancy, or establishing a market mechanism for the allocation of blood or organs for transplantation is potentially believed to be—namely, some things just should not be for sale’. Wendel, ‘Alternative Litigation Finance and Anti-Commodification Norms’ 4. 14  In 2011, recognizing the growing trend of third-party funding outside and within the US, the American Bar Association released a White Paper outlining ethical issues and future considerations. Law firms that support third-party funding cite its necessity in face of the improbability in obtaining from banks the increasingly-necessary multi-million dollar funding to support complex international commercial litigation. See American Bar Association Commission on Ethics 20/20, White Paper on Alternative Litigation Financing (27 Dec. 2011), (informational report to House of Delegates); Nieuwveld and Shannon, ThirdParty Funding in International Arbitration 133–4; Steven Garber, Alternative Litigation Financing in the United States: Issues, Knowns, and Unknowns, Occasional Paper (Rand Corp., 2010) 1, . 15  Nieuwveld and Shannon, Third-Party Funding in International Arbitration 11. 16  Nieuwveld and Shannon, Third-Party Funding in International Arbitration 11. 17  Smith, ‘Mechanics of Third-Party Funding Agreements: A Funder’s Perspective’, in Nieuwveld and Shannon, Third-Party Funding in International Arbitration 27. 18  Smith, ‘Mechanics of Third-Party Funding Agreements: A Funder’s Perspective’ 27. 19  Perhaps most famously, Lord Neuberger, the President of the UK Supreme Court: ‘Thus, the public policy rationale regarding maintenance and champerty has turned full circle. Originally their prohibition was justifiable as a means to help secure the development of an inclusive, pluralist society governed by the rule of

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Gamblers, Loan Sharks, and Third-Party Funders Portugal, third-party funding is legal. In certain jurisdictions, like Germany, Switzerland, and the Netherlands, the practice is thriving.20 5.09 An increasing number of firms in these jurisdictions are using, or are contemplating using,

third-party funding for international arbitration cases, which creates competitive pressures for their rival firms based in jurisdictions like the United States, where it is still largely prohibited.21 Even jurisdictions such as Singapore, which have been staunchly prohibitive of third-party funding, may be feeling pressure to create special carve-outs for international arbitration.22

5.10 Reciprocal to these various trends, international arbitration is proving to have an irresist-

ible allure for third-party funders. International arbitration cases are particularly attractive because of the prevalence of high-value claims,23 the speed of proceedings,24 the potential for reduced evidentiary costs and streamlined procedures, the ability to control variables such

law. Now, it might be said, the exact reverse of the prohibition is justified for the same reason. The argument advanced by Acemoglu and Robinson appears positively to support the development of litigation funding, as a means of securing effective access to justice.’ Lord David Neuberger, From Barratry, Maintenance and Champerty to Litigation Funding, Harbour Litigation Funding First Annual Lecture, (8 May 2013). 20   See Susan Lorde Martin, ‘Litigation Financing: Another Subprime Industry that Has a Place in the United States Market’, 53 Vill. L. Rev. 83, 107 (2008) (‘[M]‌any countries, including the UK, Australia, the Netherlands, Belgium, Germany, and South Africa, have become more amenable to third parties’ financing lawsuits, typically on a contingency basis.’); de Morpurgo, ‘A Comparative Legal and Economic Approach to Third-Party Litigation Funding’ 360 (‘Third-party litigation funding started to develop in Australia at the beginning of the 1990s and soon spread over the rest of the common law world (United States, United Kingdom, New Zealand) and further, developing in some European civil law countries (Germany, Switzerland, Austria).’). 21   See also Maya Steinitz, ‘Whose Claim Is This Anyway? Third-Party Litigation Funding’, 95 Minn. L. Rev. 1268, 1281 (2011) (‘[I]‌nternational law firms based in the United Kingdom began utilizing litigation funding or seriously considering doing so, thereby creating competitive pressures on their competitors based in the United States. As of March 2008, “[e]ight out of 10 of London’s top law firms [were] already using or assessing external funding for litigation and arbitration cases, . . . marking a dramatic move of thirdparty funding into mainstream practice. . . . Even [the US-based firm] Skadden [was] getting into the action, reportedly using third-party funding in an arbitration case”.’) (citing Claire Ruckin and Sofia Lind, ‘External Funding Booms as Litigators Plot Upturn’, Law.com (20 Mar. 2008), ). 22  See paras 5.47–5.48. 23  Since 2001, ten arbitrations have yielded awards over US$1bn (one investor-state arbitration and nine commercial awards), and another 20 arbitrations have resulted in awards of US$500m or more (three investorstate and 17 commercial arbitrations). Michael Goldhaber, ‘Arbitration Scorecard 2013’, Am. Law., 24 June 2013, . 24  While a common lament is that international arbitration is less speedy and cost-effective than corporate parties desire, the question is always ‘less’ in comparison to what? In national legal systems, even those regarded as highly effective, the average length of a case, including appeal, can be both long and unpredictable. In addition, complex commercial claims worth hundreds of millions, sometimes billions, of dollars undoubtedly require time to adjudicate. Arbitration allows greater control over timing, and arbitrators and institutions are responding to concerns about the length of arbitral proceedings, particularly delays in the rendering of arbitral awards. See, e.g., Mika Savalova and Anna-Maria Tamminem, ‘Our Point of View: Reducing Time and Cost in Arbitration—the Finnish Arbitration Institute Adopts New Rules’ (2013), (discussing numerous new rules of the Finnish Arbitration Institute aimed at increasing efficiency); Baker & McKenzie, ‘Seeking to Increase Efficiency, ICC Introduces New Arbitration Rules’ (Sept. 2011), (discussing changes to International Chamber of Commerce (ICC) arbitration rules).

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Gamblers, Loan Sharks, and Third-Party Funders as expertise of the decision-maker, and the highly enforceable nature of arbitral awards.25 Icky or not, therefore, third-party funding is now a global phenomenon and seems to be a permanent fixture in international arbitration. The arrival of third-party funding affects all participants in international arbitration, and 5.11 those effects are certain to increase over time. Parties who do not directly engage third-party funders will find themselves opposing other parties who have engaged them. Law firms that do not coordinate with funders will likewise have opposing counsel who are coordinating with them. All law firms will be competing in a marketplace in which millions and millions of dollars in law firm earnings come from funders and an increasingly large number of firms work with funders. Arbitrators, meanwhile, may hope to remain unaffected by parties’ funding arrangements. 5.12 They will inevitably, however, be called on to rule on costs issues that can be affected by the presence of funders, and potentially other rights of parties and obligations of counsel in light of funder participation. Moreover, the involvement of funders in the arbitrator selection process or other aspects of a funded party’s case strategy will raise the potential for arbitrator conflicts of interest. Arbitral institutions might prefer to consider these matters outside their purview, but they 5.13 too will be affected. In light of the possibility of funding future disputes, savvy parties may well start incorporating provisions regarding the participation of funders into their arbitration agreements. Such agreements might impose duties of confidentiality that effectively preclude disclosure necessary to engage a third-party funder, disclosure of the presence of a third-party funder in any future case, or obligations regarding costs in the event of participation by a funder. One special category of arbitration cases that has attracted particular attention by both 5.14 funders and their critics is investment arbitration. Funders are interested in these cases because of the potential for massive recoveries. Critics are concerned, however, that significant new funding in investment arbitration cases will aggravate an already exploding caseload that creates a disproportionate burden on States.26 Funders can, theoretically, provide support either for claimants or responding parties.27 Funding claimants, however, provides much greater upside than funding responding parties. In fact, despite the possibility of funding for responding parties, anecdotal research suggests that such respondent-side funding has not yet occurred in investment arbitration, apart from the interest group funding in the Philip Morris case. Against this backdrop, the arrival of third-party funders has the potential to alter the entire landscape by significantly increasing the number of claims. Investors may now obtain financing to seek relief for claims they might otherwise not have pursued. The   Nieuwveld and Shannon, Third-Party Funding in International Arbitration 11.   See De Brabandere and Lepeltak, ‘Third Party Funding in International Investment Arbitration’, 8 (2012); de Morpurgo, ‘A Comparative Legal and Economic Approach to Third-Party Litigation Funding’ 384. 27  Defence-side funding may occur, for instance, when the defendant wishes to bring costly counterclaims or cross-claims (e.g., a claim for summary judgment), or by sophisticated defendants willing to pay funders a portion of pre-calculated loss mitigated through a successful defence. See Maxi Scherer, Aren Goldsmith, and Camille Fléchet, ‘Third Party Funding in International Arbitration in Europe: Part 1—Funders’ Perspectives’, 2 Int’l Bus. L. J. 207, 211 (2012); Geoffrey McGovern et al., Third-Party Litigation Funding and Claim Transfer (RAND, 2010) 22, . In practice, it rarely happens and, to date, no respondent-side funding has been reported in an investment arbitration case by a commercial third-party funder. 25 26

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Gamblers, Loan Sharks, and Third-Party Funders resulting concern is that third-party funding will further distort perceived disparities in investment arbitration that favour investors over States.28 5.15 Third-party funders are not as yet systematically present in arbitration cases to the same extent as

attorneys, arbitrators, experts, or arbitral institutions. Their increasing presence, however, raises a host of legal and ethical questions that can affect all these actors, as well as the larger framework of the international arbitral regime. Their interaction with the ethical obligations of these various actors also highlights that third-party funders appear to be the group most distinctively untethered from any formal professional regulation.

5.16 While even most funders apparently agree that the industry cannot remain completely

unregulated,29 to date there is no clear sense of what could or should be done. This chapter lays groundwork for the international arbitration community to develop that sense, and from there build a meaningful regime for regulating third-party funder participation in international arbitration.30

5.17 The chapter begins in Section A by providing an overview of the mechanics of third-party

funding; Section B examines ethical issues that third-party funding raises for attorneys representing parties who receive funding, and explores the implications of third-party funding on arbitrator disclosure obligations. Finally, Section C examines initial efforts at self-regulation for third-party funders and contemplates future directions for third-party funding.

A.  Definitions and mechanics 5.18 Globally, dozens of prominent institutions now fund legal claims.31 Included among them

are not only specialized litigation funding firms, but also insurance companies, investment banks, and hedge funds that all compete in the same market. Collectively, these funders are capitalized well into the billions. Even just among international arbitration cases, funding is flourishing.32 Funders are reporting that upwards of 10% of their investments are in international arbitration disputes,33 both commercial and investment arbitration.

5.19 This Section examines the nature of third-party funding, offering a working definition

in Subsection 1.  Subsection 2 then describes the mechanics of third-party funding as

28  See Munir Maniruzzaman, ‘Third-Party Funding in International Arbitration—A Menace or Panacea?’ Kluwer Arb. Blog (29 Dec. 2012), ; De Brabandere and Lepeltek, ‘Third Party Funding in International Investment Arbitration’, 8. 29  Christopher Hodges, John Peysner, and Angus Nurse, ‘Litigation Funding: Status and Issues’, Oxford Legal Studies Research Paper No. 55/2012, 151 (30 Jan. 2012), (‘It is unlikely that the industry can remain unregulated.’). 30  ICCA and Queen Mary have recently teamed up to lead a Task Force on Third-Party Funding in International Arbitration, chaired by William W. Park and the author. It will undertake, through careful study with active participation of all relevant stakeholders, to turn this general sense into more concrete proposals and action items. 31  For lists of third-party funders offering consumer legal funding, loans, and claim investments, see Garber, Alternative Litigation Financing in the United States 11–15. 32  De Brabandere and Lepeltak, ‘Third Party Funding in International Investment Arbitration’ 6 (documenting rapid increase of third-party funding in international arbitration in the last decade). See also Kantor, ‘Third-Party Funding in International Arbitration’ 67 (third-party funding is ‘becoming a feature of international arbitration’). 33  Kantor, ‘Third-Party Funding in International Arbitration’ 69 (reporting Credit Suisse describes 10% of its portfolio in international arbitration, and similar investments by Juridica and Burford Capital Limited).

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Definitions and mechanics background to discussion in Section B of the various professional and ethical issues implicated by third-party funding. 1. Definitions Despite increasing recent activity, our view of third-party funders remains hazy. Funders 5.20 generally treat their investment portfolios as proprietary information,34 most funding agreements are secret, and funders’ presence in legal disputes is usually undisclosed.35 In a few international arbitration cases, the presence of third-party funding has become public. Apparently only in two cases, however, was disclosure by design.36 In other cases, disclosure has been the result of disputes between the funder and the funded party and/or its counsel.37 As a relatively new practice that operates in the shadows of an active case, the basic operational mechanics of third-party funding are not well known or well understood. Perhaps because of this opacity, significant disagreement exists about the exact nature of 5.21 third-party funding and, consequently, whether and how it should be regulated. As with any new phenomenon, the inclination is to search for similar activities as points of reference. Several possible analogues have been suggested: ‘Is this new form of economic activity best understood as an ordinary commercial lending contract, a form of insurance, a commercial joint venture, venture-capital financing, or an alternative lawyer-client fee arrangement?’38 With no clear answer in sight, even funders themselves apparently disagree over the definition of exactly what they are.39 One reason why third-party funding is difficult to define is that economic interests in a 5.22 party or a dispute can come in many shapes and sizes.40 Arrangements may be structured as   See Maya Steinitz, ‘The Litigation Finance Contract’, 54 Wm. & Mary L. Rev. 455, 463 (2012).   See Scherer et al, ‘Third Party Funding in International Arbitration in Europe: Part 1’ 217–18 (‘As a general matter, funders require that their involvement not be revealed, unless the client is compelled to do so.’). 36   See Jean E. Kalicki et al., ‘Third-Party Funding in Arbitration: Innovations and Limits in Self-Regulation (Part 2 of 2)’, Kluwer Arb. Blog (14 Mar. 2012), (mentioning Oxus Gold PLC v Republic of Uzbekistan et al., an investment arbitration case conducted under the UNCITRAL Rules); Rusoro Mining Ltd. v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/12/5 (unpublished) (identity of plaintiff funder, Calunias Capital, willingly disclosed). See also Sebastian Perry, ‘Bolivia claim attracts third party funder’, Global Arb. Rev., 5 July 2012, (discussing third-party funding of claimant in Guaracachi Am., Inc. v Bolivia, UNCITRAL, PCA Case No. 2011–17, but not disclosing identity of funder); see paras 5.25–5.26, for a discussion of Philip Morris Brands Sàrl v Uruguay, ICSID Case No. ARB/10/7. 37  See S & T Oil Equip. v Juridica Invs. Ltd, 2012 WL 28242 (5th Cir. 2012) (where the identity of Juridica, a company funding an ICSID arbitration between S & T Oil and the Romanian government, became public when S & T Oil sued Juridica in US federal court and appended a copy of the funding agreement); Chevron Corp. v Donziger, 2013 WL 1087236 (S.D.N.Y. Mar. 15, 2013) adhered to on reconsideration, 2013 WL 1975439 (S.D.N.Y. 14 May 2013) (where the identity of Burford Capital, investor in a multi-billion dollar case between Ecuadorian plaintiffs and Chevron, became public after the plaintiff’s lead attorney, Steven Donziger, waived confidentiality by cooperating with the production of a documentary about the case). 38 Anthony J. Sebok and W. Bradley Wendel, ‘Characterizing the Parties’ Relationship in Litigation Investment: Contract and Tort Good Faith Norms’, 66 Vand. L. Rev. 1832 (2013). 39  See Scherer et al., ‘Third Party Funding in International Arbitration in Europe: Part 1’ 209–10 (reporting on a roundtable, attended by various major litigation funding firms, where the participants could not agree on a definition of third-party funding). This confusion is apparent even at a terminological level. As one commentator describes, ‘[t]‌he nomenclature to describe this kind of third-party capital investment in arbitration or litigation claims is all over the map and woefully undescriptive. It has been referred to as “third-party funding”, “third-party litigation funding or financing”, or most commonly “alternative litigation funding or financing” ’. Michele DeStefano, ‘Non-Lawyers Influencing Lawyers: Too Many Cooks in the Kitchen or Stone Soup’, 80 Fordham L. Rev. 2791, 2794 (2012). 40  Sebok, ‘The Inauthentic Claim’, 63–67. 34 35

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Gamblers, Loan Sharks, and Third-Party Funders debt instruments, equity instruments, risk-avoidance instruments, or as full transfers of the underlying claims. Some agreements permit or require active participation of the third-party funder in key strategic decisions in the case, while other agreements are limited to periodic updates. 5.23 Conventional definitions are limited to agreements entered into after a dispute has arisen,

but they can be entered into either before or after the case is filed. Moreover, many funding arrangements are not necessarily entered into between the principal funder and the party. Funders often create ‘special purpose vehicles’ that are separate corporate structures from the funders themselves to facilitate the funding arrangement.41 In some situations, funders may provide financing directly to law firms. In addition to variations in structure, the conditions for funding and for recovery by a third-party funder also vary significantly. A typical agreement provides for funders to receive a percentage of recovery, and the percentage increases with the passage of time since the initial investment.

5.24 Even when funding agreements are entered into directly between a client and the funder,

it is not simply a bilateral relationship. The funding arrangement involves a symbiotic relationship with the party’s law firm.42 Law firms encourage, facilitate, and more often than not initiate parties’ application for third-party funding to cover their fees or reduce their own risk if the case involves contingency fees. Informal agreements, with various degrees of specificity, often exist between funders and law firms. These agreements, as well as the primary funding agreements with parties, may involve specified reductions in a law firm’s contingency fee or hourly rates; they may establish flat fee billing or some hybrid fee structure.43

5.25 Although most third-party funding arrangements are entered into for profit, that is not

always the case. For example, in the investment arbitration case brought by Philip Morris

41   See Cento Veljanovski, ‘Third-Party Litigation Funding in Europe’, 8 J.L. Econ. & Pol’y 405, 430 (2011) (‘[Third-party litigation funding investors] rely on Special Purpose Vehicles, which . . . are legal entities created for . . . the acquisition, financing, or both, of a project or the set up of an investment. They are usually used because they are free from pre-existing obligations and debts, and are separate from the parties that set them up for tax and insolvency purposes.’). 42  See Nieuwveld and Shannon, Third-Party Funding in International Arbitration 20 (illustrating funding relationships as triangular and involving law firms in non-contractual relationships with the party and funder). Some scholars have attempted to analyse the funding relationship with the funded party in isolation. See Sebok and Wendel, ‘Characterizing the Parties’ Relationship in Litigation Investment’ 4 n. 6 (‘This paper considers only one leg of the triangle, namely, the relationship between the investor and the funded client.’). This analysis of the funding relationship is based on certain assumptions that may be counterfactual, and in any event are not adopted in this chapter. 43  According to Burford Capital’s website, reducing contingency fee risk ranks among the top reasons for law firms to contact Burford. See Burford: For law Firms, (‘Law firms call us . . . to monetize a contingent fee or conditional position to de-risk it or to generate cash for further growth and expansion . . . [to secure] a source of financing for the expenses in a contingent or conditional fee case . . . [to offset] a partial contingency or conditional fee . . . to accelerate receipt of their fee [in a settled case or if a] client seeks an insurance solution.’); Steinitz, ‘Whose Claim Is This Anyway?’ 1276 (‘Also critical to the viability of the industry’s business model in the United States is that funders leverage their emerging relationships with law firms to negotiate reduced contingencies, reduced hourly rates, flat fees, or some combination of the aforesaid.’); John C. Coffee, Jr, ‘Litigation Governance: Taking Accountability Seriously’, 110 Colum. L. Rev. 288, 341 (2010) (‘Australian litigation funders do appear to take an active role in the litigation, often selecting the law firm and making important litigation decisions.’); Jonathan Wheeler and Felicity Potter, ‘Welcome to the Party’, New L. J., Oct. 23, 2008 (‘The funder is also likely to demand, as much as anything as a sign of faith in the merits of the case on the part of the claimant’s lawyers, that the claimant’s solicitors enter

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Definitions and mechanics against Uruguay, The Bloomberg Foundation and its ‘Campaign for Tobacco-Free Kids’ provided outside financial support for the Uruguayan government.44 Although technically within the definition of third-party funding, this arrangement seems to have much more in common with pro-bono support for legal causes than legal profiteering usually associated with the term ‘third-party funding’. Despite the myriad possibilities, and potential that additional variations will develop and 5.26 flourish, to date one model largely predominates in international arbitration.45 This relatively fixed model allows for a working definition of third-party funding for the purposes of this chapter. In the context of this discussion, third-party funding is defined as the financing of an arbitration by a party who has no pre-existing interest in the dispute, on the basis that, if the funded party is successful in the dispute, the funder will be paid out of the proceeds of any amounts recovered as a consequence of the dispute.46 Ultimately, this definition may be too narrow to capture the full range of relevant agreements, but it is a helpful model for analysing the relevant legal issues. 2. Mechanics As noted in the introduction, one potential benefit third-party funders bring to dispute set- 5.27 tlement is an ability to engage in a disinterested, dispassionate assessment of claims. This differentiates them from both the client and its attorney. A client, no matter how sophisticated, is inevitably influenced in its claim assessment by its own business incentives and perceptions about the facts underlying the claim. The objectivity of a party’s lawyers is not necessarily free from obstruction either. Their role as advocates and obligation of loyalty, as well as their own potential to earn hourly fees from the case, makes it difficult for them to assess claims from a wholly independent perspective. Funders, by contrast, have both structural detachment and financial incentives to engage in a uniquely exacting, independent, and fine-tuned assessment of the case.

into a discounted conditional fee agreement whereby the solicitors charge perhaps 70% of their usual costs but are entitled to an uplift in the event of success.’). 44   See Press Release by Uruguay’s Counsel, Foley Hoag LLP, ‘Government of Uruguay Taps Foley Hoag for Representation in International Arbitration Brought by Philip Morris to Overturn Country’s Tobacco Regulations’, 8 Oct. 2010, . 45  See Nieuwveld and Shannon, Third-Party Funding in International Arbitration 2. 46  See Press Release by Uruguay’s Counsel, Foley Hoag LLP, ‘Government of Uruguay Taps Foley Hoag’. (‘Third-party funding is a financing method in which an entity that is not a party to a particular dispute funds another party’s legal fees or pays an order, award, or judgment rendered against that party, or both.’); Garber, Alternative Litigation Financing in the United States ix (defining third-party financing as, ‘Provision of capital by nontraditional sources to support litigation activity’); William H. van Boom, ‘Third-Party Financing in International Investment Arbitration’, 25 (21 Dec. 2011), (defining third-party funding as ‘a contract between a claimant in an investment arbitration procedure and a party who has no pre-existing interest in the arbitration’); Rupert Jackson, Review of Civil Litigation Costs: Final Report (Dec. 2009), (defining third-party funding as:  ‘The funding of litigation by a party who has no pre-existing interest in the litigation, usually on the basis that (i) the funder will be paid out of the proceeds of any amounts recovered as a consequence of the litigation, often as a percentage of the recovery sum; and (ii) the funder is not entitled to payment should the claim fail’); Clifford J.  Hendel, ‘Third Party Funding’, 9 Spain Arb. Rev. 67, 75 fn. 17 (2010); Lawrence S. Schaner and Thomas G. Appleman, ‘The Rise of 3rd-Party Litigation Funding’, Law 360, 21 Jan. 2011, .

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Gamblers, Loan Sharks, and Third-Party Funders 5.28 Top funders report an average review-acceptance rate of 10-1, meaning that for every 10 cases

reviewed, they only agree to fund one case.47 In deciding whether to accept a case, they assess its legal, factual, practical, and (sometimes) political variables to determine risks, likelihood of success, and potential rate of return. In making this assessment, funders are not only free from many of the pressures that can cloud a party’s or law firm’s assessment of the same claim. They are also subject to pressures from shareholders to pick claims that are likely to deliver high rates of return.

5.29 In assessing claims, funders bring a level of sophistication and precision that is almost shock-

ingly unknown and unmanageable by even large, sophisticated multi-national companies and the world’s most sophisticated law firms.48 Third-party funders create a risk-assessment model or matrix that takes into account the percentage likelihood of different outcomes in light of specific factors, such as the jurisdiction of the claim, strength of the claimant’s legal arguments, strength of facts supporting the arguments, extent of loss flowing directly from the respondent’s conduct, a claimant’s motivation, commitment and honesty, the experience of the claimant’s legal team, the respondent’s ability/likelihood to pay, reasonable duration to obtain an award, and costs of bringing the claim.49

5.30 Data for the matrix is obtained through meticulous due diligence by the funder, its legal team,

and accountants. The analysis entails inquiries of the claimant’s lawyers regarding timing and evidentiary issues, and compilation and assessment of all material documents. As discussed in greater detail later, these material documents may include confidential information. Based on this matrix, the funder determines the likelihood of estimated returns on investment over a period of years, which will be weighed against other investments in the funder’s overall portfolio.

5.31 Given their precision in assessing cases, verified by impressive rates of return, third-party

funders seem to be a type of ‘super-lawyer’. Most funders, however, would reject this appellation. Funding agreements expressly and repeatedly disclaim that the funder is providing legal services or that the agreement creates an attorney-client relationship.50 There are numerous reasons for funders’ resistance to lawyer status, but the gap between super-lawyer and non-lawyer highlights some structural questions about exactly how third-party funders operate.

5.32 In its ‘super-lawyering’ assessment of the case, the funder makes assumptions about par-

ticular legal arguments or positions, as well as particular characteristics about the potential arbitrators or experts.51 After all that effort, a funder seems unlikely to remain passive if a client’s counsel were to adopt strategies at odds with these assumptions. There must, in other words, be an overwhelming interest in debating or at least sharing a funder’s analysis of the case with the party or its counsel, or both. The problem is that, in some jurisdictions, most particularly the United States,52 sharing or providing such advice would be considered the illicit practice of law by a non-attorney.   Veljanovski, ‘Third-Party Litigation Funding in Europe’ 420.   See Smith, ‘Mechanics of Third-Party Funding Agreements: A Funder’s Perspective’ 28–35; Veljanovski, ‘Third-Party Litigation Funding in Europe’ 418–20. 49  See Scherer et al., ‘Third Party Funding in International Arbitration in Europe: Part 1’ 212–13; Smith, ‘Mechanics of Third-Party Funding Agreements: A Funder’s Perspective’ 30–32. 50  See also Priest v Hennessy, 409 N.E.2d 983, 987 (N.Y. 1980) (‘[T]‌he payment of legal fees by a third person, in and of itself, [does not] create an attorney-client relationship between the attorney and his client’s benefactor sufficient to sustain a claim of privilege.’). 51  For an overview of how third-party funders assess cases, see Smith, ‘Mechanics of Third-Party Funding Agreements: A Funder’s Perspective’ 18. 52   See paras 5.63–5.64. 47 48

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Definitions and mechanics Despite their efforts, various concerns about funders teeter on this thin and sometimes wob- 5.33 bly line between super-attorney and non-attorney.53 Funding agreements expressly deny the existence of an attorney-client relationship at a structural level. But express denial does not necessarily negate the creation of a de facto attorney-client relationship. The premier litigation funders are founded and staffed by lawyers who, as noted, engage in exacting analysis of the funded cases. If an attorney is providing substantive legal advice about critical strategy issues to a party and the party is expressly acting on that advice,54 it is strained and formalistic to say no legal services are being provided simply because of a repeated incantation to that effect.55 Funders seek to avoid being designated as attorneys so they do not run foul of certain attor- 5.34 ney regulations or find themselves subject to obligations and potential liabilities that funders prefer to avoid, such as malpractice liability. But if a party’s attorneys are following advice and direction of funders, there may be other theories that impose obligations and potential liabilities. For example, in the United States, some courts have found that when insurers direct or control counsel for an insured, that counsel is acting as the insurer’s agent and the insurer is therefore vicariously liable for any malpractice of counsel.56 While theories of agency and vicarious liability may seem like creative interpretations, they aim at the practical problem of what happens if an insurance company is directing counsel to engage in conduct that is professionally incompetent.57 One unique feature of international arbitration, in contrast to domestic court litigation, 5.35 is that the line between attorney and non-attorney is less important, and in most instances non-existent. As described in Chapter 1, counsel for parties in international arbitration do not need to be locally licensed and local ethical rules are not generally deemed to apply to counsel appearing in international arbitral proceedings.58 More importantly, it is not necessary or presumed in international arbitration proceedings that a party’s representative will be a licensed attorney in any jurisdiction. This detachment of national attorney regulation, 53   A similar problem occurred in the United States with regard to accountants, since accounting advice on certain issues was almost impossible to separate from legal advice. John S. Dzienkowski and Robert J. Peroni, ‘Multidisciplinary Practice and the American Legal Profession: A Market Approach to Regulating the Delivery of Legal Services in the Twenty-First Century’, 69 Fordham L. Rev. 83, 110–2 (2000); Laurel S. Terry, ‘A Primer on MDPs: Should the ‘No’ Rule Become a New Rule?’ 72 Temp. L. Rev. 869, 881–2 (1999). 54  Some funders not only include language disavowing an attorney-client relationship, but carefully and systematically structure all their interactions with parties and counsel to avoid providing legal advice. See, e.g., Juridica Capital Management Ltd., (accessed 27 October 2013) (‘The Juridica team also is keenly aware of ethical and professional constraints lawyers face and only will provide third-party vetted solutions within these constraints. Through its network of leading advisers in the field of professional ethics, the Juridica team can navigate professional restrictions and engineer solutions for law firm financing. The team tailors its due diligence systems to mitigate disclosure risks and maintain the confidences and privileges that lie at the heart of the legal profession.’). 55  The conditions under which an attorney-client relationship is nuanced and varies from system to system. 56  See, e.g., Boyd Bros. Transp. Co. v Fireman’s Fund Ins. Co., 729 F.2d 1407, 1409–11 (11th Cir. 1984); Pac. Emp’rs Ins. Co. v P.B. Hoidale Co., 789 F. Supp. 1117, 1122–3 (D. Kan. 1992). Other courts have reached the opposite conclusion, relying on attorneys’ ethical duties of independence to the insured to prevent the insurer from exercising the degree of control over the litigation necessary for vicarious liability. See, e.g., Ingersoll-Rand Equip. Corp. v Transp. Ins. Co., 963 F. Supp. 452, 455 (M.D. Pa. 1997); Lifestar Response of Ala., Inc. v Admiral Ins. Co., 17 So. 3d 200, 218 (Ala. 2009). 57  Another practical problem that arises out of existing formal definitions of funding relationships is that, except in rare instances when funders have an express contractual relationship with a law firm, funders generally do not have direct legal recourse for malpractice committed by the law firm. This issue is taken up later. 58  See paras 1.73–1.87.

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Gamblers, Loan Sharks, and Third-Party Funders and flexibility regarding the formal status of party representatives in international arbitration, may create potentially important opportunities, which are discussed later in Section B.

B.  Funders and other participants in international arbitration 5.36 The seeming unseemliness of third-party funding is what inspired ‘those benighted Puritans

of yore’59 as well as modern regulators to ban these practices through a number of rules and doctrines. The medieval doctrines of champerty and maintenance have been both a shield (as a contract defence) and a sword (making such financing a crime), the doctrine of usury provides a ready defence against enforcement of a funding contract, and various ethical rules prohibit or limit attorney collaboration with third-party funders.60 This Section examines issues that arise under national law with funders in relation to parties in Subsection 1, and attorneys in Subsection 2. Each subsection concludes by considering how these various national laws may affect third-party funding of international arbitration claims. Subsection 3 analyses the special considerations that arise regarding third-party funders and international arbitrators. 1.  The funder and the party

5.37 With sophisticated commercial parties who negotiate at arm’s length, contract law doctrine

generally imposes few substantive limitations, and courts and arbitrators rarely consider those limitations in the absence of fraud.61 Funding of legal claims, however, has historically been an exception. Agreements to fund legal claims have generally been regarded as implicating a range of public policy issues. How those national laws and policies apply in international arbitration is uncertain, as analysed further later.

a.  National law limitations on funding agreements 5.38 Traditional doctrines of maintenance, champerty, and barratry constrain third-party funding agreements in many common law jurisdictions. The doctrine of maintenance prohibits ‘[i]‌mproper assistance in prosecuting or defending a lawsuit given to a litigant by someone who has no bona fide interest in the case; meddling in someone else’s litigation’.62 Champerty, a type of maintenance, traditionally prohibited ‘an agreement to divide litigation proceeds between the owner of the litigated claim and a party unrelated to the lawsuit who supports

  Parloff, ‘Have You Got a Piece of This Lawsuit?’ 68.   Attorney ethics implicated in third-party funding are discussed later, paras 5.57–5.82. 61  See e.g., Scherk v Alberto-Culver Co., 417 US 506 (1974); M/S Bremen v Zapata Off-Shore Co., 407 US 1, 12 (1972) (‘The choice of that forum was made in an arm’s-length negotiation by experienced and sophisticated businessmen, and absent some compelling and countervailing reason it should be honoured by the parties and enforced by the courts.’); Judgment of 22 March 1976, III Y.B. Comm. Arb. 283 (Tunis Court of First Instance) (1978) (‘[I]‌t is generally accepted that international commercial relations are subject to their own customs. It follows from there that the present question does no longer depend on the personal law of the parties, but rather on the subject matter of the contract. The latter is the result from the parties’ will, and constitutes their own law since the contract is an international contract concluded in order to correspond to the needs of the parties on the one hand and to international commercial customs on the other.’). See generally, Gary B. Born, International Commercial Arbitration (2014) 861 (‘Contracts tainted by fraud or fraudulent inducement are invalid or null in virtually all legal systems.’) (citing UNIDROIT, UNIDROIT Principles of International Commercial Contracts, art. 3.8 (2004); Restatement (Second) Contracts §164 (1981); J. Herbots (ed.), International Encyclopedia of Laws, Contract, ‘Argentina’ 136, 139, ‘Australia’ 77, ‘Bulgaria’ 88, ‘France’ 90, ‘Hong Kong’ 84 (Update January 2007); Gee, ‘The Autonomy of Arbitrators and Fraud Unravels All’, 22 Arb. Int’l 337 (2006)). 62  Black’s Law Dictionary, 9th edn. (2009). 59 60

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Funders and other participants in international arbitration or helps enforce the claim’.63 Barratry, a similar doctrine, is defined as ‘[v]exatious incitement to litigation’.64 While champerty and related doctrines have been relaxed or discarded in many jurisdictions, 5.39 in other jurisdictions they continue to act as a legal bar to a contract for third-party funding. For example, in Australia, recent decisions of the High Court have eliminated specific champerty and maintenance actions with respect to litigation funding, although the doctrines may be applied within a narrow public policy objection to enforceability.65 In the UK, maintenance and champerty have not been completely eliminated, but they do not necessarily preclude third-party funding generally.66 In Canada, maintenance and champerty remain causes of action in tort. There is an exception for legitimate business arrangements, which some argue should include third-party funders.67 Although there is little precedent, South African courts also appear to have a liberal attitude toward third-party funding.68 The individual jurisdictions in the United States take a variety of approaches. A minority of 5.40 states, such as Massachusetts and South Carolina, have completely abandoned champerty.69 Comparatively, New York, which has limited champerty, would bar third-party funding only if such funding were made for the primary purpose of bringing an action or proceeding.70 At the other end of the spectrum, many states, like Delaware, deem any transaction champertous where an assignee has no interest in an assigned cause of action prior to the assignment.71 For those jurisdictions in which these doctrines are still applicable, they may limit or bar third-party agreements. 63   Black’s Law Dictionary, 9th edn. (2009). See also Otech Pakistan Pvt. Ltd. v Clough Eng’g Ltd., [2006] SGCA 46, ¶ 32 (Sing.) (‘champerty exists where one party agrees to aid another to bring a claim on the basis that the person who gives the aid shall receive a share of what may be recovered in the action’) (citation omitted). 64   Black’s Law Dictionary 9th edn. (2009). The US Supreme Court provided simplified versions of these doctrines: ‘Put simply, maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome; and barratry is a continuing practice of maintenance or champerty.’ In re Primus, 436 US 412, 424 (1978). 65   See Campbells Cash & Carry Pty Ltd. v Fostif Pty Ltd., [2006] 229 CLR 386 (Austl.). 66   See Simpson v Norfolk & Norwich University Hosp. NHS Trust [2011] EWCA 1149 (stating that ‘the assignment of a cause of action will be void as against public policy where the assignee does not have a “sufficient interest” to justify pursuit of the proceedings for his own benefits’) (citing Trendtex Trading Corp. v Credit Suisse [1982] AC 679 (UK)); Giles v Thompson, [1993] UKHL 2, 7, [1994] 1 AC 142, [1993] 3 All ER 321 (UK); Factortame Ltd. v Sec. of State for the Env., Transport & Regions (No.2), (2003) QB 381, 389 (UK). For a discussion of factors UK courts consider, see Nieuwveld and Shannon, Third-Party Funding in International Arbitration 100–1. 67 See Nieuwveld and Shannon, Third-Party Funding in International Arbitration 193–4; Steve Tenai and Nicholas Saint-Martin, ‘Third Party Funding of Class Actions’, Norton Rose Fulbright, 28 Apr. 2011, 2, ; Poonam Puri, ‘Financing of Litigation by Third-Party Investors: A Share of Justice?’ 36 Osgoode Hall L. J. 515, 535 (1998), . 68  See Headleigh Private Hospital (Pty) Ltd t/a Rand Clinic v Stoller & Manning Attorneys and Others 2001 (4) SA 360 (W) (S. Afr.); PriceWaterHouse Coopers Inc. and Others v National Potato Co-operative Ltd. 2004 (6) SA 66 (SCA) (S. Afr.). 69  See Osprey, Inc. v Cabana Ltd. P’ship, 532 S.E.2d 269, 277 (S.C. 2000) (‘[W]‌e abolish champerty as a defense. We are convinced that other well-developed principles of law can more effectively accomplish the goals of preventing speculation in groundless lawsuits and the filing of frivolous suits than dated notions of champerty.’); Saladini v Righellis, 687 N.E.2d 1224, (Mass. 1997) (abolishing barratry, champerty, and maintenance). 70  See Bluebird Partners v First Fid. Bank, N.A., 709 N.Y.S.2d 865, 870 (2000). 71  See Hall v State, 655 A.2d 827, 829–30 (Del. Super. Ct. 1994). See also Steinitz, ‘Whose Claim Is This Anyway?’ 1288–90 (2011); Sebok and Wendel , ‘Characterizing the Parties’ Relationship in Litigation Investment’, 1832 (listing 16 states as allowing champerty: Colorado, Connecticut, Florida, Iowa, Kansas, Maine, Maryland, Massachusetts, Missouri, New Hampshire, North Carolina, Ohio, Oklahoma, Oregon, Washington, and West Virginia).

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Gamblers, Loan Sharks, and Third-Party Funders 5.41 Local prohibitions against usury may also affect the validity of funding agreements. Because

the third-party funder takes on the risk that a party will not make a recovery in arbitration, a third-party funder may seek a high rate of return in the event that a party makes a successful recovery.72 In some jurisdictions, the rate of return associated with a third-party funding contract can, under certain conditions, constitute usury. For example, some American courts have ruled that, if the client’s recovery is effectively guaranteed at the time the third-party funding was obtained, the resulting third-party funding contract is void as usury because, in essence, the funding was provided with an absolute promise of repayment at a usurious rate.73

5.42 These various doctrines are generally considered mandatory law in the jurisdictions that

adhere to them. As mandatory law, these doctrines theoretically prohibit parties from entering into agreements that would violate them. There are several reasons to believe, however, that such prohibitions may not operate, or operate with the same force, when the claim being funded is an international arbitration claim and the funding agreement includes an international arbitration clause.74 b.  National limitations in international arbitration

5.43 The last section examined how various national substantive law doctrines prohibit or limit

third-party funding agreements. It is not clear, at a purely doctrinal level, whether these doctrines apply to claims that are subject to arbitration, not litigation. Moreover, even if national doctrines purport to apply in arbitration, the complex interplay of procedural and substantive law raises doubts about what, if any, practical effect those national laws would have on international arbitrations.75 While full exploration of these issues is beyond the scope of this chapter, a general overview is helpful to illustrate the level of uncertainty about how third-party funding is regulated in international contexts and the challenges involved in effectuating meaningful regulation within international arbitration.

5.44 The starting point for this enquiry is the national law of the arbitral seat of the underlying

dispute, which some commentators contend may provide the basis for annulling an award if the law of the seat bars third-party funding under champerty and related doctrines.76

72  A survey of third-party funders in Europe revealed they typically negotiate for a return of between 20% and 40% of the award or settlement, but it may be 50% or more in some cases. Several of the investors surveyed emphasized the need to leave claimants at least 50% of the claim value, as taking a larger cut would de-motivate claimants and be viewed as commercially unfair. See Scherer et al., ‘Third Party Funding in International Arbitration in Europe: Part 1’ 213–14; Veljanovski, ‘Third-Party Litigation Funding in Europe’ 424. 73  See Lawsuit Fin. v Curry, 683 N.W.2d 233, 240 (Mich. Ct. App. 2004) (finding third-party funding arrangement was usurious because judgment had already been entered in favour of the borrower at the time the agreement was made); Echeverria v Estate of Lindner, 7 Misc.3d 1019(A), *8 (Sup. Ct. Nassau Cty. 2005) (finding third-party funding arrangement was usurious because recovery was guaranteed under strict liability statute). 74  Although there are few reported cases in which a US court has had to address any challenge to an arbitration award that is the product of a third-party-funded claim. But see Fausone v US Claims, Inc, 915 So.2d 626 (Fla. Ct. App. 2d Dist. 2005) (upholding confirmation of arbitration award in favour of funder’s claim for recovery of unpaid amounts under funding agreement). 75  See, e.g., Kantor, ‘Third-Party Funding in International Arbitration’ 76. 76  See Campbells Cash & Carry Pty Ltd. v Fostif Pty Ltd., (2006) 229 CLR 386, paras 88–89 (Aust.) (explaining that third-party litigation funding may be condemned as against public policy in a jurisdiction prohibiting maintenance and champerty); Ian Meredith and Sarah Aspinall, ‘Do Alternative Fee Arrangements Have a Place in International Arbitration?’ 72 Arb. 22, 22 (2006) (discussing the dangers of annulment of an arbitration award where a fee arrangement is contrary to public policy at the seat). See also discussion at note 84.

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Funders and other participants in international arbitration Notwithstanding commentators’ projections and funders’ avoidance of arbitrations seated in these jurisdictions, there are several reasons to doubt that champerty and related doctrines of the seat would or could be properly applied to annul an arbitral award. As a threshold matter, there is a question of whether local prohibitions based on champerty 5.45 and related doctrines apply in international arbitrations. These substantive doctrines were developed to protect public courts from vexatious litigation.77 The same concerns do not apply with respect to claims being pursued in arbitration. Lord Denning long ago opined that the doctrine of champerty extended to ‘. . . any contentious proceedings where property is in dispute which becomes the subject of an agreement to share the proceeds’.78 Courts in various jurisdictions, however, are split about whether this analysis is correct. Even before England expressly permitted third-party funding in litigation, English courts 5.46 acknowledged that the doctrine of champerty did not extend to arbitral proceedings.79 Courts in Hong Kong have similarly concluded that champerty does not apply to claims brought in arbitration.80 These decisions are consistent with more general efforts of jurisdictions to compete to be arbitration-friendly and attract more international arbitration business. For those US jurisdictions that still adhere to champerty prohibitions, courts do not appear 5.47 to have exempted agreements that pertain to claims to be arbitrated as opposed to litigated.81 In Singapore, courts have been soundly committed to the notion that the doctrine of champerty is a complete bar not only to litigation but also arbitration proceedings seated in Singapore.82 Most commentary seems to end its analysis about the effect of champerty and related doctrines here, but this is only the first, and in many ways least important, step. Even if these substantive prohibitions apply to agreements to fund claims that are subject to 5.48 arbitration, it is uncertain what, if any, effect those substantive prohibitions would have on the arbitral proceedings themselves or on resulting awards. The mandatory law of the seat can be a basis for annulling an award, but generally only the mandatory procedural law, not mandatory substantive law of the seat. Champerty and related doctrines are traditionally regarded as substantive law that can implicate tort or criminal sanctions or be interposed as a defence to an action between the parties to a champertous contract. They are not, however,

77  See John A. Glenn, ‘Champerty and Maintenance; Barratry and Related Matters’, 14 Corpus Juris Secundum, § 4 (database updated Sept. 2013). 78  In re Tripeca Mines Ltd. [1962] 3 All ER 351, 355 (UK). 79  See Giles v Thompson [1993] UKHL 2, [1994] 1 AC 142, [1993] 3 All ER 321, 331–32 (UK). See also Melanie Willems, Third Party Funding—A paper for the Society of Construction Arbitrators, Howrey LLP (Oct. 2009), (noting that ‘since Bevan Ashford v Geoff Yeandle [1998] 3 WLR 172 it has been clear that champerty does extend to arbitration’, but noting further that ‘the common law has never had any difficulty with accepting that these principles do not apply to litigation or arbitration abroad, as English public policy is not applied extraterritorially’, citing Mansell v Robinson [2007] EWHC 101 (QB) (UK)). 80  See Cannonway Consultants Ltd. v Kenworth Eng’g Ltd. [1995] 1 HKC 179, 179–81 (H.K.) (holding that champerty applied in Hong Kong but that it did not apply to arbitration proceedings). 81  See, e.g., Johnson v Wright, 682 N.W.2d 671, 678 (Minn. Ct. App. 2004); Hall v State, 655 A.2d 827, 829-30 (Del. Super. 1994); McCullar v Credit Bureau Sys., Inc., 832 S.W.2d 886, 887 (Ky. 1992). 82  See Otech Pakistan Pvt. Ltd. v Clough Eng’g Ltd., [2006] SGCA 46, ¶ 38 (Sing.) (‘In our judgment, it would be artificial to differentiate between litigation and arbitration proceedings and say that champerty applies to the one because it is conducted in a public forum and not the other because it is conducted in private.’).

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Gamblers, Loan Sharks, and Third-Party Funders generally regarded as a basis for refusing relief in the underlying case to which the funding agreement contract relates83 or for affecting other aspects of procedure. 5.49 The substantive law of the legal seat of an international arbitration can be a basis for annul-

ling an arbitral award, but ordinarily only when that application of that law in an award violates public policy.84 Champerty and related doctrines, however, are by their own terms aimed at the individuals or the funding agreements themselves. As such, they can result in remedies against the funder and the funding agreement, but not generally the outcome of the funded dispute. This limitation on remedies for champerty is consistent with general policies against interfering with the finality of court judgments or awards.

5.50 In addition to policies in support of the finality of adjudicatory outcomes, targeting judicial

judgments or arbitral awards would also be too indirect to be an appropriate remedy. An analogy to a more familiar area can illuminate why. A classic example when an award may be annulled as against public policy is if it runs foul of the antitrust or competition law of the seat. But an award resolving a downstream dispute between a seller and an end user would not be subject to annulment simply because the seller had originally purchased the goods pursuant to a contract that was void as anti-competitive. Public policy, in other words, aims at the original tainted agreement (here the original sales agreement), not all subsequent related transactions (the downstream resale agreement to the end user). Similarly, champerty and public policy generally aim at the underlying champertous agreement, not the outcome of the dispute it funded. This limited remedy is also justified to avoid affecting parties who are unrelated to or even unaware of the original champtertous agreement. Under this view, annulment based on local prohibitions against champerty would require courts to extend the doctrine of champerty beyond current meaning and effect, and extend public policy as well.85 International trends, meanwhile, are moving in the opposite direction as national courts are increasingly reluctant to annul awards based on local public policy.86 This trend is demonstrated by the general enforceability of awards that involve contingency fees and punitive damages, which some systems would treat as against public policy in local litigation.87 83   See Oil, Inc. v Martin, 44 N.E.2d 596, 600 (Ill. 1942) (‘[T]‌he defense of champerty can only be interposed in an action between the parties to the champertous contract, and does not furnish any reason for refusing relief in the proceeding to which the champertous agreement relates.’). 84  See Born, International Commercial Arbitration 1287, 2621–23 (asserting that ‘courts in the arbitral seat are usually . . . exclusively competent to entertain actions to annul or set aside the award’, and that the best interpretation of the public policy at the seat that may be relied upon to annul an award are ‘those public policies of the forum intended for international settings, but only insofar as that public policy is consistent with applicable international law principles’). Sources that reason that third-party funding agreements can be a basis for challenging an award seem to assume that champerty and related doctrines are procedural rules, and thus might be applicable like other procedural rules of the seat. Most commentary on these doctrines instead frames them as substantive criminal offences or contract defences. See de Morpurgo, ‘A Comparative Legal and Economic Approach to Third-Party Litigation Funding’ 393–94 (‘As in Australia, champerty is neither a tort nor a crime in most U.S. states, but its most visible impact is as a contract defense.’); Paul Bond, ‘Making Champerty Work: An Invitation to State Action’, 150 U. Pa. L. Rev. 1297, 1304 (2002) (‘Aside from the few states that attach criminal sanctions to champerty, champerty’s most visible impact is as a contract defense.’). It is possible, as discussed previously, that presence of a third-party funder could raise challenges based on procedural irregularities, for example, if there were a conflict of interest between an arbitrator and funder. 85  This analysis pertains to potential annulment based on local prohibitions against champerty. Separate grounds for annulment may exist, of course, if the presence of the third-party funder were to undermine the fundamental fairness of the proceeds, for example, because of an undisclosed conflict of interest between an arbitrator and funder. 86  See Born, International Commercial Arbitration 3723. 87  See Born, International Commercial Arbitration 3769.

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Funders and other participants in international arbitration This analysis of the limits of champerty finds indirect support in the fact that even the 5.51 high-profile Singapore cases affirming application of champerty prohibitions extraterritorially and in international arbitration have addressed only the enforceability of the funding agreement or punishment for the funder. These decisions do not address the annulment or confirmation of a resulting judgment or an award seated there. Under similar reasoning, it is even less likely that a jurisdiction—even one in which cham- 5.52 perty and related doctrines exist in full force—would refuse to recognize and enforce an arbitral award because a party received outside funding. Generally, the substantive law of the enforcement jurisdiction is not a basis for refusing recognition and enforcement of an award. Accordingly, only a finding by a court that the mere presence of a third-party funder contaminated the award with a public policy violation would justify non-enforcement of the award.88 As already examined, since champerty and related doctrines generally only invalidate the funding agreement, not the outcome of the dispute, this result seems unlikely. In the United States, for example, public policy is generally determined by reference to 5.53 federal policy.89 There is no federal policy against champerty,90 let alone a policy that is ‘well-defined, deeply held, and rooted in basic notions of morality and justice’91 so as to justify denial of enforcement on the grounds of public policy under the New York Convention. In addition to the probability that funded awards can effectively evade national law when such 5.54 an award is challenged, funding agreements are also likely beyond the reach of the law of the seat (and by extension enforcement jurisdictions). Funding agreements are ancillary to arbitration agreements. As a result, funding agreements do not generally have any formal relationship to the legal seat, and even less to the enforcement jurisdiction. The ability of the legal seat to impose criminal sanctions or invalidate a funding agreement would necessarily involve extraterritorial application of national law. Only if one of the parties to the funding agreement (the funder, the party, or the attorney) were a local citizen, or the agreement bore some other relationship to the seat, would extraterritorial application of laws against champerty be a reasonable extension.92 88   There do not appear to be any publicly available cases in which an award has been refused recognition and enforcement simply because of the presence of a third-party funder in the underlying proceedings. Nevertheless, also on this point, commentators have—perhaps mistakenly—assumed that such awards would readily be refused enforcement as against public policy. See Kantor, ‘Third-Party Funding in International Arbitration’ 76 (‘Potentially applicable bodies of law include the law at the seat of arbitration, the law governing the substance of the dispute, the law governing the arbitral procedure and the law of the jurisdiction(s) in which the ultimate award may be enforced.’); Jern-Fei Ng, The Role of the Doctrines of Champerty and Maintenance in Arbitration (Sweet and Maxwell, May 2010) 76 Arb. 208. See also Nieuwveld and Shannon, Third-Party Funding in International Arbitration 13 (‘In addition, a court at the place of enforcement or at the seat may decide that the existence of a funding agreement is a public policy issue that is relevant to its decision regarding whether to recognize, enforce, annul, vacate, or set aside an award under the New York Convention or another enforcement mechanism.’) 89  See Restatement (Third) International Commercial Arbitration § 4–18, cmt. (‘Courts look principally to federal law to determine the existence and application of public policy. However, its judgments in this regard are legitimately informed by the policies of several states and, in a rare case, may be determined largely by reference to the policy of a single state.’). 90  US federal courts classify champerty as a substantive, rather than procedural, doctrine and utilize conflicts of law analysis to determine which specific jurisdictional champerty law to apply. See Martin v Morgan Drive Away, Inc., 665 F.2d 598, 605 8 n.5 (5th Cir. 1982) (applying champerty law at the place of assignment, qualifying that Erie doctrine is not applied, and stating ‘we look to state law instead of creating a federal common law of champerty out of whole cloth’) (citing Sampliner v Motion Picture Patents Co., 255 F. 244 (2d Cir. 1918), rev’d on other grounds, 254 U.S. 233 (1920)). 91  See Restatement (Third) of the US Law of International Commercial Arbitration § 4-18, cmt. a. 92  See Law Society of Singapore v Kurubalan s/o Manickam Rengaraju, [2013] SGHC 135 (affirming the Singapore Legal Society ban on champertous agreements extends to Singaporean lawyers even in proceedings

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Gamblers, Loan Sharks, and Third-Party Funders 5.55 In the typical situation, however, none of the parties to the funding agreement would be

locals. Funding agreements are typically governed, as a result of choice-of-law provisions, by law other than that of the substantive law of the seat and presumably by law under which third-party funding is permissible. Finally, the funding agreement would separately designate that any arbitration arising out of the funding agreement itself be seated in a jurisdiction in which third-party funding is permissible. To work around this legal arbitrage, courts of the seat would have to engage in considerable jurisdictional overreach to apply extraterritorially their own substantive law to invalidate the funding agreement.

5.56 Notwithstanding general assumptions about the applicability of national prohibitions

against third-party funding arrangements in international arbitration, careful planning can ensure that both awards and funding agreements escape all potential scrapes with national prohibitions. Even more than other actors in international arbitration, third-party funders, their agreements, and the awards produced pursuant to those agreements, seem to float in a protected ether and out of reach of all national regulation. 2.  The funder and counsel

5.57 Even where it is not prohibited under substantive doctrinal law for parties to enter into

agreements with funders, such agreements can raise a host of potential issues relating to the ethical obligations of the attorneys representing those parties. These issues can effectively preclude funding agreements in those jurisdictions. Again, however, the effect of national ethical rules in international arbitration remains uncertain. Recall the analysis in Chapter 1. Most national ethical rules are unclear about whether they extend extraterritorially, and most jurisdictions do not impose local ethical rules on attorneys appearing in locally seated international arbitrations. Accordingly, to the extent national ethical rules impose limitations on third-party funding arrangements, it is uncertain how those limitations will apply in international arbitration. Nevertheless, they are important benchmarks to consider.

a. Independence 5.58 Professionalism is founded on the notion of independence.93 For attorneys, professional independence and the rules and regulations enacted to support it are premised on an essential belief that a confidential relationship between lawyer and client is essential for effective representation. Rules requiring professional independence are designed to protect clients, the public, the legal system, and the legal profession by ensuring that lawyers exercise independent judgment.94 This commitment has traditionally been interpreted to require that lawyers ‘must avoid the corrupting influence of nonlawyers (other than, of course, their own clients); clients are best served by lawyers who preserve their “professional independence” by avoiding unholy alliances with the laity’.95

conducted abroad, while affirming a previous judgment that the doctrine applies equally to arbitration proceedings). 93  Herbert M. Kirtzer, ‘The Professions Are Dead, Long Live the Professions: Legal Practice in a Postprofessional World’, 33 L. & Soc’y Rev. 713, 716–8 (1999) (describing three definitions of the term ‘profession’ but identifying the ‘two key elements’ of a profession as exclusivity of membership and application of abstract knowledge, with altruism, regulatory autonomy, and service as additional elements). 94  DeStefano, ‘Non-Lawyers Influencing Lawyers: Too Many Cooks in the Kitchen or Stone Soup’, 2794. 95  Bruce A. Green, ‘The Disciplinary Restrictions on Multidisciplinary Practice: Their Derivation, Their Development, and Some Implications for the Core Values Debate’, 84 Minn. L. Rev. 1115, 1117 (2000).

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Funders and other participants in international arbitration A number of practical features of funding arrangements raise both questions about attorney 5.59 independence and application of rules designed to ensure it. As an essential starting point, as explained previously, in determining whether to fund a case, a funder undertakes its own investigation into the merits of the claim. Third-party funding agreements often require the claimant’s lawyer to keep the funder advised of major developments and in some instances can require the funder’s consent with respect to important decisions regarding the progress of the case, most importantly issues relating to settlement.96 In some instances, a third-party funder may request clarification of case details and suggest (potentially insist on) alternatives to the current legal strategies being pursued by the funded party’s counsel.97 As one commentator explains, some providers seek a veto right: ‘[One funds provider] had to approve the filing of the lawsuit; controlled the selection of the plaintiffs’ attorneys; recruited fact and expert witnesses; received, reviewed, and approved counsel’s bills; and had the ability to veto any settlement agreements.’98 While it may be possible for clients to delegate some of their rights to funders, such assignment 5.60 may also raise questions about the attorney’s role and professional independence. For one, a funder’s right to control litigation decisions creates ambiguity as to whom the attorney actually represents—the original client, the funder, or both. Even if not acting as the funder’s attorney per se, it is possible that the attorney could be deemed for certain purposes to be the funder’s agent, which some courts have found to be the case in some insurance contexts.99 This ambiguity may be particularly onerous where the funder has retained its own independent legal representation, and that representative disagrees with the attorney’s strategic choices.100 Funding agreements may also require the lawyer to acknowledge a duty to pay a portion of the 5.61 proceeds pursuant to a judgment or settlement. Some commentators argue that this latter obligation may compromise or undermine the lawyer’s duty of loyalty to the client, which would ordinarily mandate remission of funds to the client.101 A related concern is that funders may There are also less altruistic motivations, such as protection of lawyers’ monopoly on the market for legal services. See DeStefano, ‘Non-Lawyers Influencing Lawyers: Too Many Cooks in the Kitchen or Stone Soup’, 2794. 96  Garber, Alternative Litigation Financing in the United States 18. Additionally, lawyers may have obligations to provide material facts, time estimates, and other information to funders. See N.Y. Bar Assn., Formal Opinion 2011-2: Third Party Litigation Financing (2011), (‘Non-recourse financing agreements often require the claimant’s lawyer to keep the financing company apprised of any developments in the litigation or to seek the company’s consent when taking steps to pursue or resolve the lawsuit, such as making or responding to settlement offers.’); Nieuwveld and Shannon, Third-Party Funding in International Arbitration 20. 97  Christopher Hodge et al., Research Project, International Conference on Litigation Funding, 19 May 2010, 14–15, . 98  Kantor, ‘Third-Party Funding in International Arbitration’ 77 (quoting Abu-Ghazaleh v Chaul, 36 So. 3d 691, 693 (Fla. Dist. Ct. App. 2009)). Of note, contracting for such an extreme amount of control may backfire. In the Abu-Ghazaleh case, the Florida court held the investment firm to be an actual party to the dispute and, therefore, liable to the defendant for punitive damages. Abu-Ghazaleh, 36 So. 3d, 694. 99  See Steinitz, ‘Whose Claim Is This Anyway?’, 1323–25. For discussion of the agency role of attorneys in dealing with insured and insurers, see Douglas R. Richmond, ‘Independent Counsel in Insurance’, 48 San Diego L. Rev. 857, 902–04 (2011); Boyd Bros. Transp. Co. v Fireman’s Fund Ins. Co., 729 F.2d 1407, 1409–11 (11th Cir. 1984); Pac. Emp’rs Ins. Co. v P.B. Hoidale Co., 789 F. Supp. 1117, 1122–23 (D. Kan. 1992); Cont’l Ins. Co. v Bayless & Roberts, Inc., 608 P.2d 281, 294 (Alaska 1980); Stumpf v Cont’l Cas. Co., 794 P.2d 1228, 1232 (Or. Ct. App. 1990); Majorowicz v Allied Mut. Ins. Co., 569 N.W.2d 472, 475–77 (Wis. Ct. App. 1997). 100  See ABA 20/20 Informational Report. 101  Stuart L. Pardau, ‘Alternative Litigation Financing: Perils and Opportunities’, 12 U.C. Davis Bus. L.J. 65, 77 (2011) (citing Memorandum Soliciting Comment, ABA Comm’n on Ethics 20/20 Working Grp.

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Gamblers, Loan Sharks, and Third-Party Funders object to certain expenses, such as the employ of expert witnesses, which an attorney exercising independent judgment would deem important but a funder aiming at a quick settlement would not. 5.62 While these issues seem unique to third-party funding, they are strikingly similar to concerns

raised in other situations in which a non-party pays for legal representation. For example, in either classic insurance contexts102 or contingency fee arrangements, in which insurers or attorneys may similarly prefer to press for quick settlement.103 b. Fee-splitting

5.63 Law firms often directly seek outside investment to fund their client’s claims. Some of the

agreements may involve sharing what would otherwise be attorney fees and sharing recovery from final awards and settlement agreements. The problem with these arrangements is that any contractual requirements for attorneys to split fees with third-party funders may conflict with national prohibitions that exist in some jurisdictions against attorneys sharing fees with nonlawyers.104 Rules against fee-splitting are intended to protect attorney independence, prevent lay persons from the unauthorized practice of law, and discourage unwarranted direct solicitation of clients.105 Much akin to champerty, the rationale is that investors—unburdened by attorney ethical obligations—could be tempted to abuse the legal process for frivolous, collusive, or otherwise unscrupulous gain.

5.64 Currently, financers avoid these prohibitions by contracting directly with claimants, rather

than attorneys, or by incorporating and listing as a different entity or in a different country.106 In contracts with parties, the claimant could either delegate directly to the investor his or her

on Alt. Litig. Fin. (23 Nov. 2010), , 4, 5 (calling such arrangements potentially creating a ‘Hobson’s choice between the duty of loyalty to the client and a contracted duty owed to an ALF supplierx’ [sic]). 102   Richmond, ‘Independent Counsel in Insurance’ 863 (‘[I]‌t is reasonable to conclude that insurers should be permitted to select independent counsel for insureds as long as the appointed defence lawyers understand that the insured is their sole client and the insurer acts honestly and responsibly in the process. Several courts have endorsed this approach.’); Richmond, ‘Independent Counsel in Insurance’ 892 (‘Most insurers have litigation management guidelines—commonly referred to as “outside counsel guidelines” . . . that call for case budgets, set reporting intervals or requirements, mandate preapproval of certain activities or expenses, and the like . . . [T]here is nothing improper about an insurer’s requiring independent counsel to adhere to its outside counsel guidelines as long as the guidelines do not interfere with or unreasonably restrict independent counsel’s professional judgment or otherwise prejudice the insured’s defense.’). 103  See Eric Helland and Alexander Tabarrok, ‘Contingency Fees, Settlement Delay, and Low-Quality Litigation: Empirical Evidence from Two Datasets’, 19 J. L. Econ. & Org. 517, 517 (2003) (‘We find that . . . contingency fees increase legal quality and decrease the time to settlement.’); Richard W. Painter, ‘Litigating on A Contingency: A Monopoly of Champions or A Market for Champerty?’ 71 Chi.-Kent L. Rev. 625, 697 (1995) (citing a N.Y. Times article on Umphrey, Burrow, Reaud, Williams & Bailey attorneys’ quick settlement of claims against Phillips Petroleum in a 1989 chemical explosion case for a US$65m contingency fee); Richard M. Birnholz, ‘The Validity and Propriety of Contingent Fee Controls’, 37 UCLA L. Rev. 949, 953 (1990). 104  Fee-splitting with non-lawyers is primarily a US problem, but other countries share similar rules. See, e.g., Model Rules of Prof ’l Conduct, R. 5.4(a) (US); Solicitors’ Code of Conduct (2007; amended 31 Mar. 2009), R. 8.01, 8.02 (UK); Legal Profession (Professional Conduct) Rules, G.N. No. S 156/1998, (1998; revised 31 May 2010), R. 39 (Singapore). See generally, John S. Dzienkowski and Robert J. Peroni, ‘Conflicts of Interest in Lawyer Referral Arrangements with Nonlawyer Professionals’, 21 Geo. J. Legal Ethics 197, 205–6 (2008); Roger W. Reinsch, ‘An Ethical Dilemma: Fee Splitting with Foreign Lawyers’, 33 Int’l L. 801 (1999). 105  See Steinitz, ‘Whose Claim Is This Anyway?’ 1291–92. 106  See Christopher Hodges et al., ‘Litigation Funding: Status and Issues’, Oxford Legal Studies Research Paper No. 55/2012 (2012), 44–5, (citing Deborah Hensler, ‘The United States of America’, in Christopher Hodges et al., The Costs and Funding of Civil Litigation (Hart

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Funders and other participants in international arbitration right to a portion of the award, or agree to pay the investor its share after receiving the entire award. Under the latter approach, funders incorporate separate limited liability companies or some other legal entity in order to obtain the original claim on the basis of an assignment or a transfer of ownership to the special purpose vehicle from the party that owns the claim. The funder then has a profit-sharing arrangement with the original claimant.107 The legality of these types of arrangements remains uncertain in some jurisdictions.108 c.  Attorney-client confidences Funders often seek access to confidential information to assess and monitor cases. This access 5.65 to confidential information raises two distinct issues. On the one hand, neither parties nor funders want funders’ access to such confidential information to be treated as a waiver of the attorney-client or work-product privilege.109 Most countries have strict rules limiting information that attorneys may divulge to non-clients.110 Some jurisdictions recognize a common interest exception to attorney-client privilege.111 The exception, however, is far from uniform across jurisdictions and its application to confidential communications in international arbitration remains manifestly uncertain. In the UK, the exception has been extended to after-the-event insurers112 and some commen- 5.66 tators speculate that it would likely apply to third-party funders.113 Similarly, in Australia,

Publishing, 2010); Steinitz, ‘Whose Claim Is This Anyway?’ 1292; Sebok and Wendel, ‘Characterizing the Parties’ Relationship in Litigation Investment’ 15. 107  See William H. van Boom, ‘Third-Party Financing in International Investment Arbitration’, 47 n. 228 (2011), ; Tom Ewing, ‘Introducing the Patent Privateers’, 45 Intell. Asset Mgmt. 31 (Jan.–Feb. 2011). 108  See Steinitz, ‘Whose Claim Is This Anyway?’ 1292. 109  See Steinitz, ‘The Litigation Finance Contract’ 474–76 (discussing a litigation funding contract with provisions that both potentially waive attorney-client privilege and protect against waiver). See, e.g., Mich. State Bar Standing Comm. on Prof ’l Ethics, Advisory Op. RI-321 (2000), (discussing agreement between civil tort plaintiff and unnamed funder who was ‘entitled to inspect all records, including all privileged attorney-client records, relating to the collateral’). On the other hand, some funders claim they never seek privileged information. See also ABA 20/20 Informational Report, 30 (citing Comments of Juridica Capital Mgmt. Ltd. to the Am. Bar Ass’n Working Group on Alternative Litig. Fin. 2 (17 Feb. 2011) (‘Our experience is that ALF funders generally do not need access to privileged or confidential information in order to make financing decisions. We perform our due diligence by relying primarily on publicly-filed pleadings and memoranda and other non-privileged materials. We do not seek attorney-client privileged information.’); Comments of Oasis Legal Finance/Alliance for Responsible Consumer Legal Funding to the Am. Bar Ass’n Working Group on Alternative Litig. Fin. 4 (5 Apr. 2011) (‘By and large, consumer legal funding companies have no need to request privileged information from attorneys regarding their clients.’) (cited in ABA 20/20 Informational Report, 30). 110  See Maya Goldstein Bolocan (ed.), Professional Legal Ethics: A Comparative Perspective (Central European and Eurasian Law Initiative, 2002) 31–2 (citing Model Rules of Prof ’l Conduct, R. 1.6 (US); Solicitors’ Code of Conduct (2007; amended 31 Mar. 2009), R. 4 (UK); Indian Evidence Act, R. 126 (1872); CCBE Code, Art. 2.3.1; Ethical Code for Italian Lawyers (1999), art. 9(1), (2) (It.); Order of the Profession (1996), art. 2 (Ger.); Attorneys’ Code of Ethics (1999), art. 26 (Croat.); Advocates’ Code of Ethics (1996), art. 13 (Alb.); Code of Ethics of Lawyers, Associates, and Lawyers’ Apprentices (1993), art. 19 (Maced.); Law on Advocacy (1982), art. 6 (3), and (4) (Pol.)). 111   See paras 5.66–5.68. 112   See Winterthur Swiss Ins. Co. v AG (Manchester) Ltd. [2006] EWHC (Comm) 839 (Eng.). 113   See Meriam N. Alrashid, Jane Wessel, and John Laird, ‘Impact of Third Party Funding on Privilege in Litigation and International Arbitration’, 6 Disp. Res. Int’l 101, 108 (2012) (‘A third party funder may be deemed to share a common interest in the confidentiality of communications provided by the client’s lawyer as

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Gamblers, Loan Sharks, and Third-Party Funders it is possible that the common interest exception to waiving the attorney-client privilege applies to the funder.114 In the United States, by contrast, most courts decline to apply the common interest exception to communications to those who share common legal (not economic) interests.115 Given the uncertainties, attorneys are advised to be careful to comply with all jurisdictional requirements for confidentiality waivers, such as full disclosure that the waiver may limit other attorney-client evidentiary privileges.116 5.67 In comparison, as examined in Chapter  3, civil law countries do not have a general

‘attorney-client privilege’ but instead protect the substance of the attorney-client relationship with rules of ‘professional secrecy’ and related rules.117 These rules may impose more stringent duties on attorneys against communicating case- or client-related information to a third party. For example, in Switzerland, since 2011, the client and third parties may refuse to disclose all ‘attorney correspondence’ to the extent that it relates to the representation of a party, on the basis of this attorney secrecy.118 Under French and Belgian law, the attorney’s duty of confidentiality cannot be divided or waived by the client, whereas under German law, the attorney is released from its duty of confidentiality if instructed by the client to communicate the matter to a third party.119

5.68 Even if a party’s confidential information can be shared with third-party funders, it is less

clear whether the third-party funder would thereafter have an obligation to retain the party’s information as confidential. Perhaps more importantly, attorneys also have other obligations ancillary to their confidentiality obligations that do not apply to funders. For example, in most systems, attorneys have obligations to avoid conflicts of interest and to refrain from using confidential information for purposes that are contrary to their client’s interests.120 No established sources impose similar duties on third-party funders who acquire confidential information.

it has the common interest of pursuing litigation or arbitration in much the same way an insurer does.’). See also Nieuwveld and Shannon, Third-Party Funding in International Arbitration 55–6. 114  See Nieuwveld and Shannon, Third-Party Funding in International Arbitration 91; Michael Legg, Litigation Funding in Australia: Identifying and Addressing Conflicts of Interest for Lawyers, released by the US Chamber Institute for Legal Reform (2012), 20 (discussing lawyer-client-funder disclosures in the context of Campbells Cash & Carry Pty Ltd. v Fostif Pty Ltd., [2006] 229 CLR 386 (Aust.). 115  Compare Leader Techs. v Facebook, Inc., 719 F. Supp. 2d 373 (D. Del. 2010) (finding no common interest exception), with Mondis Tech. v LG Electronics, Nos. 2:07-CV-565-TJW-CE, 2:08-CV-478-TJW, 2011 WL 1714304 (E.D. Tex. 4 May 2011) (applying work product doctrine to documents shared with third-party financer). 116  See American Bar Association Commission on Ethics 20/20, White Paper on Alternative Litigation Financing; Wayne Atrill, Ethical Issues in Litigation Funding, presented at the Globalaw Conference, 16 Feb. 2009, 17–18, . 117  See Laurel S. Terry, ‘An Introduction to the European Community’s Legal Ethics Code – Part I: An Analysis of the CCBE Code of Conduct’, 7 Geo. J. Legal Ethics 1, 28 (1993–94); Carsten R. Eggers and Tobias Trautner, ‘An Exploration of the Difference Between the American Notion of “Attorney-Client Privilege” and the Obligations of “Professional Secrecy” in Germany’, 7-SPG. Int’l L. Practicum 23 (1994). 118  See Alrashid et al, note 111, 116–8; Squire Sanders, Antoine Adeline, and Laure Perrin, ‘Third-Party Funding of Arbitration in France’, Lexology, 27 Mar. 2013, . 119  See Maxi Scherer, Aren Goldsmith, and Camille Fréchet, ‘Third Party Funding of International Arbitration Proceedings—A View From Europe: Part II: The Legal Debate’, 6 Int’l Bus. L. J. 649, 657 (2012). 120  See Catherine A. Rogers, ‘Fit and Function in Legal Ethics: Developing A Code of Conduct for International Arbitration’, 23 Mich. J. Int’l L. 341, 371–73 (2002); Terry, ‘An Introduction to the European Community’s Legal Ethics Code Part I’ 43; Geoffrey C. Hazard, Jr., ‘An Historical Perspective on the Attorney-Client Privilege’, 66 Cal. L. Rev. 1061 (1978).

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Funders and other participants in international arbitration d.  Funders and attorneys in international arbitration As explored in Chapters 1 and 3, the applicability of national ethical rules is more attenuated 5.69 in international arbitration settings. Their application is further complicated by the fact that opposing counsel in the same case may not be bound by the same national ethical rules.121 Existing ethical ambiguities mean that even familiar issues relating to third-party funding— such as professional independence, rules relating to fee splitting, and confidentiality—can potentially take on new life in international arbitration.122 For example, in international arbitration, the ambiguities and definitional problems about 5.70 how client confidences affect third-party funders may be less problematic. As explored in more detail later, parties have much more latitude to retain representatives of their choice, and those representatives are not necessarily presumed to be licensed attorneys. Moreover, attorney-client privilege is subject to assessment at an international level, and prevailing practices harmonize national traditions. In other words, in international arbitration funders who act as ‘superlawyers’ may not need to maintain a stance as non-lawyers to comply with national regulations, but if they are deemed to be non-lawyers, internationally determined attorney-client privilege protections may still be extended to them. The uncertainty and flexibility surrounding attorney ethics in international arbitration creates potentially unique perils for third-party funding participation, but also potentially unique opportunities to build a regime for developing effective means of regulating their participation at the international level. 3.  The funder and arbitrators In addition to parties and counsel, third-party funding in international arbitration also raises 5.71 special concerns about arbitrator impartiality, disclosure, and potential conflicts of interest. Several factors amplify the potential for arbitrator conflicts of interest: the increase in the number of cases involving third-party funding, the highly concentrated segment of the funding industry that invests in international arbitration cases, the symbiotic relationship between funders and a small group of law firms, and relatedly the often close relations among elite law firms and leading arbitrators.123 Against this backdrop, conflicts can materialize out of several possible scenarios. a.  Potential conflicts and the inadequacy of current rules The most obvious potential for conflict is if an individual arbitrator is repeatedly appointed 5.72 in cases involving the same third-party funder. Once the frequency of repeat appointments by a particular party or law firm reaches a certain threshold, it is generally regarded as raising possible concerns about influence or inter-dependency. For this reason, the IBA Guidelines require that when an arbitrator has had more than two appointments in the last three years 121   Third-party funding exists in ‘a de facto absence of professional regulations that enables funders and attorneys to operate outside of the disciplinary reach of bar associations’. Steinitz, ‘Whose Claim Is This Anyway?’ 1278. 122   According to one scholar, with respect to judgment enforcement, the ethical conduct of lawyers is only relevant if it involves German attorneys acting in Germany, not foreign attorneys acting in a foreign jurisdiction. See Wolfgang Wurmnest, ‘Recognition and Enforcement of US Money Judgments in Germany’, 23 Berkeley J. Int’l L. 175, 195 (2005) (reasoning that a German court will enforce a US judgment involving contingency fees charged by US attorneys, but would not enforce that judgment if the attorneys were German attorneys and rendered their services in Germany) (citing Burkhard Heβ, ‘Inländische Rechtsbesorgung gegen Erfolgshonorar?’ NJW 2485, 2486 (1999)). 123   See Goldstein, ‘Should the Real Parties in Interest Have to Stand Up?’ 7. See also Scherer et al., ‘Third Party Funding of International Arbitration Proceedings—A View From Europe: Part II’ 651–3 (discussing third-party funder disclosure obligations in the context of potential arbitrator impartiality issues).

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Gamblers, Loan Sharks, and Third-Party Funders by the same party124 and three or more appointments in the last three years by the same law firm,125 the repeat appointments must be disclosed. They are not necessarily a basis for disqualification, but they raise sufficient concern to warrant disclosure and to raise the spectre of possible disqualification.126 5.73 Third-party funders also raise some unique concerns that are distinct from those that arise

with either law firms or parties. For example, take the case of one party (P1) that is funded by funder (F) and X is the presiding arbitrator in one arbitral dispute (A1), but X also serves as counsel to the claimant in another unrelated second arbitration (A2) and the claim is funded by the same funder F. The fact that X’s fees in A2 are paid by F and that X is likely to have significant contacts with F on the basis of the funding agreement raises concerns beyond simple repeat appointments. The financial arrangement and ongoing contacts arguably raise questions about X’s impartiality and independence with respect to the claimant in A1 that would make it inappropriate for X to sit as an arbitrator in A1.127

5.74 The resolution to the problem illustrated in this example seems self-evident, but only if X is

aware of the existence of a funding agreement. Currently, parties have no obligation to reveal the participation of third-party funders in a dispute. The simple presence of a funder in an international arbitration case is therefore most often unknown or unknowable. More importantly, the nature of funders’ relationships with attorneys and funded parties is generally unknown, as is the funder’s level of involvement in case management and strategy, including the selection of arbitrators or expert witnesses.

5.75 Even if unknown at the initial stages, the existence of the funding agreement may be discov-

ered later. A number of circumstances create the possibility of disclosure: if a dispute arises between the client or the law firm and the funder; if financing is suspended or funding caps are reached that require explanations from a party about their financial situation; or if need arises to respond to a challenge by an opposing party that a claim of financial distress is unfounded because of a suspected funding arrangement.128 Any of these scenarios can lead to disclosure about the presence of a funder.

5.76 Later discovery of a third-party funder whose links with an arbitrator should have been

disclosed may require that the arbitrator step down or risk rendering an award that may be set aside or refused recognition and enforcement as a result of the conflict. Even if discovered after the close of proceedings, a conflict that should have been disclosed can still be a potential ground for attacking an award, even if the arbitrator was ostensibly unaware of the funding arrangement.129

5.77 In the United States, although exceedingly rare, discovery is sometimes permitted in set aside

or enforcement proceedings. One of the few areas where discovery has been granted is when one party alleges arbitrator partiality or misconduct and requires assisted investigation to   IBA Guidelines on Conflicts of Interest in International Arbitration, § 3.3.2 (2004).   IBA Guidelines, § 3.3.7. 126  For extended analysis on the relationship between disclosure and disqualification, see Chapter 8. 127  This hypothetical was developed by Maxi Scherer in ‘Out in the open? Third-party funding in arbitration’, CDR News, 26 July 2012, . 128  Goldstein, ‘Should the Real Parties in Interest Have to Stand Up?’ 7. 129  There is some disagreement about the effect of an arbitrator’s lack of knowledge of a conflict. As the Reporters’ notes to the Restatement explain with regard to US Law: 124 125

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Funders and other participants in international arbitration prove the allegation. Discovery has been granted in a few cases when such allegations were credible and the objecting party made some preliminary factual showing of potential bias.130 The existence of an agreement between a party and a funder who has significant ties to an arbitrator or the arbitrator’s firm might be sufficient to meet that threshold. The evidence adduced could prove ultimately that the arbitrator did not actually know about 5.78 the participation of the funder, and hence could not have been biased by it, but that outcome is not necessarily a victory. An absence of specific knowledge by an arbitrator is not universally recognized as negating allegations of bias, particularly when circumstances create inappropriate financial relationships from which an arbitrator clearly benefitted, even if unknowingly. The enquiry would be messy and expensive. The outcome is unlikely to make any of the participants very happy. In sum, for arbitrators to assess the potential for conflicts and make necessary disclosures, 5.79 third-party funders’ participation in particular international arbitration cases will necessarily have to be disclosed, and specific rules to address how and when relationships with arbitrators must be disclosed, and when they are sufficient to constitute a conflict of interest that warrants disqualification, need to be created. Despite the potential for conflicts, the current version of the IBA Guidelines says noth- 5.80 ing about repeat appointments with respect to third-party funders, or any other potential There is some disagreement among courts about whether an arbitrator’s lack of knowledge of a conflict precludes a finding of evident partiality. Some courts have taken the view that an absence of knowledge about a conflict per se precludes a finding of evident partiality. See Gianelli Money Purchase Plan & Trust v ADM Inv. Servs., Inc., 146 F.3d 1309, 1313 (11th Cir. 1998); see also Rev. Unif. Arb. Act § 12(e), 7 U.L.A. 43 (2005) (‘An arbitrator appointed as a neutral arbitrator who does not disclose a known, direct, and material interest in the outcome of the arbitration proceeding or a known, existing, and substantial relationship with a party is presumed to act with evident partiality under Section 23(a)(2).’). This approach—categorically excluding from consideration all conflicts regarding which an arbitrator has no actual knowledge—arguably discourages arbitrators from fulfilling their duty to investigate. It also imposes on the aggrieved party the unreasonable burden of having to prove actual knowledge about a conflict on the part of an arbitrator. The better view, and the one represented in the final factor of the test stated in the section, is that absence of knowledge is relevant to a court’s analysis of the facts of a case, particularly as relates to the investigation undertaken by the arbitrator. See New Regency Prods., Inc. v Nippon Herald Films, Inc., 501 F.3d 1101, 1107–8 (9th Cir. 2007). If the arbitrator has taken reasonable measures to investigate potential conflicts, a lack of knowledge about a particular conflict will generally weigh significantly against a finding of evident partiality. Restatement (Third) US Law of Int’l Comm. Arb, § 4-13, Reporters’ Note f (2013). 130  See Restatement (Third) US Law of Int’l Comm. Arb. § 4-33, Reporters’ Note b (2013): A party is generally not entitled to discovery in support of its action for post-award relief or in its defence against such an action. However, in rare and exceptional circumstances, when there is clear and specific evidence of a well-founded allegation of arbitrator bias or improper conduct, or similar basis for vacating or denying confirmation, recognition, or enforcement of an award, limited discovery may be available at the court’s discretion to develop a record with respect to those allegations. See also Woods v Saturn Distrib. Corp., 78 F.3d 424, 430 (9th Cir. 1996) (refusing further discovery in the absence of the requisite clear evidence and suggesting what might constitute ‘clear evidence’); Andros Compania Maritima, SA v Marc Rich & Co., 579 F.2d 691, 702 (2d Cir. 1978) (‘[A]‌ny questioning of arbitrators should be handled pursuant to judicial supervision and limited to situations where clear evidence of impropriety has been presented.’); Empresa Constructora Contex Ltda. v Iseki, Inc., 106 F. Supp. 2d 1020, 1024–5 (S.D. Cal. 2000) (‘To justify discovery, the party challenging the arbitration decision has the burden of showing the alleged defect, such as partiality of the arbitrators or some other fundamental defect. Unless a party presents clear evidence of impropriety, the party will not be permitted to conduct additional discovery.’); Hunt v Mobil Oil Corp., 654 F. Supp. 1487, 1495–6 (S.D.N.Y. 1987) (in action to vacate under FAA § 10, court finds that ‘a discovery process would negate the concept of arbitration as a relatively quick means of dispute resolution’).

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Gamblers, Loan Sharks, and Third-Party Funders bases for conflicts. A sub-committee of the IBA Task Force responsible for the Guidelines has been constituted and, as this book is going to press, is considering what, if any, modifications to the Guidelines are warranted or needed. For reasons discussed in greater detail later, however, it is not self-evident how existing Guidelines could or should be applied to third-party funders. More importantly, deriving clearer Guidelines inevitably implicates issues that are beyond the scope of the IBA Task Force, such as whether and when the participation of a third-party funder must be disclosed in an arbitration. One funder has publicly argued that the participation of third-party funders in international arbitration should never require disclosure and categorically cannot create a conflict of interest for arbitrators.131 Although rhetorically vigorous in presentation, the substantive support for this view lacks any real legal analysis. The primary argument appears to be that, since existing disclosure rules do not specifically identify third-party funders, there are no rules requiring disclosure.132 This sort of ipso facto reasoning appears to be an ‘oversimplification’ of this—in the author’s words—‘complex’, ‘multi-faceted’, and ‘fast evolving financial area’.133 5.81 Whatever else may be uncertain about third-party funding, it seems reasonably clear that a

position advocating against any disclosure obligations regarding the presence of third-party funders, and categorically denying the potential concerns for arbitrator conflicts, will not carry the day. If nothing else, other third-party funders have been publicly supportive of the need for third-party funding participation to be disclosed and have acknowledged the need to be risk-adverse, particularly with regard to potential arbitrator conflicts.134 In the meantime, courts, legislatures, and bar authorities are now beginning to take up these and other questions regarding third-party funders in litigation contexts. The absence of any public decisions or express rules to date, in other words, suggests only the newness of and relative uncertainty about this phenomenon. It does not imply that no rules are appropriate or that they will not be forthcoming.

5.82 Unfortunately, for reasons described earlier in this chapter and analysed with regard to regu-

lation of other participants in Chapters 2, 3, and 4, rules developed at the national level will not provide ready answers for international arbitration. The remainder of this section lays out a preliminary framework for analysing the issue of third-party funders and potential

131  This argument has been advanced by Mr. Christopher Bogart, Chief Executive Officer of Burford Capital, the ‘world’s largest provider of capital for dispute resolution’. Christopher Bogart, ‘Third Party Funding in International Arbitration: An Overview of Arbitration Finance’ . 132  Bogart, ‘Third Party Funding in International Arbitration’ (‘[T]‌he courts have decided which financial interests are to be disclosed and which need not be. . . . Providers of financing to a party or a case . . . are not required to be disclosed.’). 133  Bogart, ‘Third Party Funding in International Arbitration’ (‘In reality, the practice is complex and multi-faceted. . . . Thus, one must not engage in over-simplification in this complex and fast-evolving financial area.’). 134  See Richard Fields, ‘The connection between transparency in litigation and investment in the corporate claims market’, Juridica Capital: Blogging on the World of Law & Finance, 6 April 2010 (advocating transparency in litigation financing). See also Martin, note 20, 115 (‘[T]‌o assure the proper disclosure, transparency, and advice to borrowers that will prevent abuses in the industry, state legislatures should adopt a licensing regime for litigation funders that would include data collection about the industry.’); Susan Lorde Martin, ‘The Litigation Financing Industry: The Wild West of Finance Should Be Tamed Not Outlawed’, 10 Fordham J. Corp. & Fin. L. 55 (2004).

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Funders and other participants in international arbitration conflicts of interest for arbitrators, and the final section of this chapter analyses the current state of regulation of third-party funders. b.  Analysing potential funder-arbitrator conflicts The necessary starting point for analysis with respect to potential arbitrator conflicts is the 5.83 IBA Guidelines, which as described in Chapter 2, are an essential touchstone for all participants when they evaluate potential arbitrator conflicts. The Guidelines, however, were written before the advent of third-party funding as it exists today, and therefore do not expressly address third-party funding relationships. The range of potential forms of funding arrangements, discussed at the beginning of this chapter, indicate that the first challenge will be to decide how to characterize or define third-party funding in order to analyse how and when conflicts might arise, and to identify potential conflicts that require arbitrator disclosure or raise the potential for disqualification. This chapter began with a working definition of third-party funding based on the prevail- 5.84 ing model that exists in international arbitration—the non-recourse loan for the purpose of financing a claim that need only be repaid in the event that the claim is successful. Even limiting the enquiry to this working definition, it is not at all obvious what the relevant points of reference are for evaluating potential conflicts. In some respects, a third-party funder’s position is aligned with and analogous to that of a party since the fortunes of both are tied to the outcome of the case. In other respects, third-party funders function similar to law firms, in steering case strategy, including selecting arbitrators. As analysed earlier, relationships with and repeat appointments by both parties and law firms can trigger disclosure requirements. A competing view, advanced by several scholars studying third-party funding in US litiga- 5.85 tion,135 is that the appropriate baseline analogue for third-party funding is equity financing or venture capital financing.136 This analogy is similar to that advanced by the funderauthor quoted earlier.137 The remainder of this section engages in a functional analysis (which previews the Functional Thesis presented in Chapter 6) to test this analogy to equity investors in assessing when funder participation should trigger arbitrator disclosure requirements. 135  Professor Maya Steinitz makes this analogy most forcefully. For an explication and analysis of the analogy, see Steinitz, ‘The Litigation Finance Contract’ 517 (‘The litigation funding industry can be spared years of evolution by looking at, and learning from, the [venture capital] industry. VC contract theory, practice, and doctrine can guide plaintiffs, lawyers, financiers, and courts on what can be done, what should be done, and how to do it. In particular, many of the concerns raised by critics of litigation funding—pressure to settle early, or late; loss of client control; compromise of attorney’s independent judgment—are reframed in one, all-encompassing system of checks and balances that satisfies both ethical and economic concerns.’). See also Elizabeth Chamblee Burch, ‘Financiers as Monitors in Aggregate Litigation’, 87 N.Y.U. L. Rev. 1273 (2012). Other scholars argue that the arrangement is more closely analogous to a simple commercial contract. See Sebok and Wendel, ‘Duty in the Litigation-Investment Agreement’, note 38. 136  Other apt analogies have been proffered, such as to contingency fees. See e.g., Kantor, ‘Third-Party Funding in International Arbitration’ 65; Steinitz, ‘Whose Claim Is This Anyway?’ 1292 (arguing that ‘commentators simply apply their preconceived views of contingency fees to litigation finance’). 137  See Bogart, note 129 (taking as a ‘given’ that ‘there is no legal, logical, or equitable basis for requiring disclosure of funding without also requiring the disclosure of other parties with economic interests in the outcome of a matter’). Arguably, this language could be interpreted to mean that the author is arguing that no test for disclosure regarding funders could be valid unless it applied equally to all forms of economic interests, not only equity investors. Since that view would seem to stretch his argument to absurdity, I take the author to intend a more moderate view that funders should be analogized to equity investors. This interpretation is consistent with his earlier assertions that ‘arbitration finance is really just specialty corporate finance’. Kantor, ‘Third-Party Funding in International Arbitration’ 65; Steinitz, ‘Whose Claim Is This Anyway?’ 1292.

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Gamblers, Loan Sharks, and Third-Party Funders c.  Funders as outside investors? 5.86 For funders, the allure of analogizing funders themselves to equity investors is that, presum-

ably, equity investors are only required to be disclosed once they reach a sufficient threshold of ownership in a party. This analogy is justified, some funders argue, because venture capitalists and private equity investors may (and sometimes do) control aspects of case management in ways that are similar to third-party funders. Sometimes, the argument goes, outside investors may even be more active in controlling case strategy, including arbitrator selection, than third-party funders. Under this view, there is no reason to separate third-party funders out for special treatment with regard to arbitrator disclosure obligations, as some have suggested should be the case.138

5.87 The IBA Guidelines are formulated to address the risk of bias for arbitrators that are impli-

cated in certain structural relationships and activities. In this regard, they apply to equity investors when such investors are a ‘controlling entity’ constitute an ‘affiliate’ of a party. Under this approach, disclosure regarding third-party funders would be determined based on the extent of their economic interest alone, and not their form or the form of their investment. While this approach seems to have some initial appeal, the analysis that follows reveals why the analogy between third-party funding and other outside investors is inapt. i. The concentration effect

5.88 A first distinction between an equity investment in a commercial party, on the one hand, and

funding a claim owned by that party relates to how the latter amplifies or concentrates the financial impact of the investment vis-à-vis the claim. The same dollar value of private equity investment in a company has a very different, much less concentrated, effect than third-party funding aimed directly at a dispute owned by that company. To take a simple example, consider a party whose overall value is US$100, US$10 of which is the value of a claim owned by the party. If an investor makes a US$1 investment in the party, that investment would give an investor an indirect 1% interest in the party’s claim, as represented in Figure 5.1:

Claimant Company (value = $100)

Arbitration Claim worth $10

$1 Investment

Equity Funder

m 1% lai ct in C e r di p In rshi ne Ow

Figure 5.1  Under these circumstances, we may not be concerned if the identity of an investor with a mere 1% interest in a party is not disclosed. 5.89 Now, consider instead if a third-party funder takes the same US$1 and invests it directly in

the arbitration claim belonging to a party that is worth US$10. Now, instead of an indirect   See Maniruzzaman, ‘Third-Party Funding in International Arbitration—A Menace or Panacea?’

138

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Funders and other participants in international arbitration 1% interest in the claim, with that same US$1 investment, the funder now has a 10% direct interest in the claim, as illustrated in Figure 5.2: Third-Party Funder

Claimant Company (value = $100)

t

en

$1

Arbitration Claim worth $10

tm es

Inv

0% aim t 1 n Cl c i e r Di ship r ne Ow

Figure 5.2  As this figure illustrates, a private equity investor would have to invest US$10 in a party to obtain the same level of interest in the dispute that the third-party funder has. That raises the question of whether any relevant relationship between an arbitrator and the third-party funder must be disclosed. Would an investor’s 10% ownership interest in a party be sufficient to trigger some disclosure obligations under the IBA Guidelines or other applicable law? The answer, it turns out, is not so clear. The IBA Guidelines, as well as other sources,139 generally require arbitrators to disclose relevant 5.90 relationships not only with parties, but also with entities that are related to those parties. Yet, exactly which related entities have to be disclosed remains somewhat ambiguous. The IBA Guidelines define the relevant related entities as ‘affiliates’ of parties, a term they reference 33 times in the Guidelines.140 Despite the prevalence of the term, the definition of ‘affiliate’ is provided rather off-handedly in footnote 5. That definition provides only that ‘the term “affiliate” encompasses all companies in one group of companies including the parent company’.141 The problem with the footnote 5 definition is that both ‘affiliate’ and ‘group of companies’ 5.91 are terms of art used in various legal systems but often given different definitions for different purposes even within a single legal system. In the United States, for example, statutes, regulations, and case law offer a definition of such terms, but they do so for specific purposes 139  See IBA Guidelines; Hrvatska Elektroprivreda, d.d. v. Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling regarding the participation of David Mildon QC in further stages of the proceedings of 6 May 2008, ; Suez, Sociedad General de Aguas de Barcelona S.A. v Argentina, ICSID Case No. ARB/03/17, Decision on the Proposal for the Disqualification of a Member of the Arbitral Tribunal (22 Oct. 2007); Suez, Sociedad General de Aguas de Barcelona S.A. v Argentina, ICSID Case No. ARB/03/19, Decision on a Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (12 May 2008); Commonwealth Coatings v Continental Casualty, 393 US 145, 149 (1968) (US); In re Pinochet, Oral Judgment 17 December 1998 and Reasons 15 January 1999 [1999] UKHL 52 (UK); Magill v Porter [2001] UKHL 67 (UK); Societe Annahold BV et al. v L’Oreal, Cour d’appel [CA] [regional court of appeal] Paris, [1986] Rev. Arb. 483; T.A.I. v S.I.A.P.E., Cour d’appel [CA] [regional court of appeal] Paris, 2 June 1989, [1991] Rev. Arb. 87 (Fr.). 140  See IBA Guidelines, §§ 1.4, 2.1.1, 2.2.1, 2.3.1, 2.3.4, 2.3.6–2.3.9, 3.1.1–3.1.5, 3.2.1, 3.2.2, 3.2.3, 3.3.3, 3.3.4, 3.4.1–3.4.3, 3.5.1, 3.5.4, 4.2.1, 4.3.1, 4.5.1–4.5.3. 141  IBA Guidelines.

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Gamblers, Loan Sharks, and Third-Party Funders and usually with respect to a specific area of law, such as tax, accounting, corporate law, or antitrust. Within the United States, corporate law and securities regulation have several different tests that apply depending on the jurisdiction and subject matter. 5.92 In some instances, multiple corporations are treated as one in order to hold a parent corpora-

tion liable for the debts of a subsidiary under the doctrine of ‘piercing the corporate veil’.142 Meanwhile, seemingly related notions of persons ‘acting in concert’ or as a ‘group’ have been used to define the scope of application of the disclosure obligations for ‘beachhead’ acquisitions under section 13(d) of the 1934 Securities and Exchange Act. In the example of section 13(d), the relevant definitions are tied to regulatory underpinnings with specific purposes relating to disclosure; although also an issue of disclosure securities disclosure rules have an entirely different purpose than disclosure for arbitrator conflicts of interest.

5.93 Most definitions of similar terms also aim to get at whether the related entity actually con-

trols the party that is the target of the primary enquiry. But the notion of control itself can be highly ambiguous. Control may mean an absolute majority of the voting shares (i.e., 50% plus one share), or there may be control also with a lower participation if no other shareholder holds more shares and the ownership structure is not concentrated (sometimes called ‘de facto’ control). Also in other legal systems, even when the notions of ‘control’, ‘affiliated persons’, or ‘groups of companies’ exist and have a statutory definition, often more than one definition exists for different purposes. For example, under Italian law, different notions of control exist for corporate law and for antitrust purposes,143 which are different yet again from the general regulation of ‘groups of corporations’ under German law.144

5.94 The IBA sub-committee faces significant challenges in refining and clarifying its definition

of ‘affiliate’. Even a clearer definition of corporate relationships will not provide effective guidance for third-party funders because they are unconstrained by corporate governance rules that otherwise limit the effect of affiliates on corporate decision-making regarding case management and strategy regarding a particular claim. ii. Corporate governance constraints

5.95 Existing IBA Guidelines extending disclosure to affiliates are aimed, even if imprecisely, at

requiring disclosure when a related entity may affect the corporate decision-making of a party, specifically when that affiliate might exercise some degree of control over the party’s decision-making regarding case management strategy. In assessing control, not only percentage ownership matters, but also how that ownership allows exercise of control over corporate decision-making, including case management.

5.96 Corporate decision-making is generally subject to corporate governance rules and struc-

tures that order and limit affiliated companies’ participation in corporate decision-making. Corporate governance rules oblige a company’s managers and directors to exercise independent judgment regarding the objectives of a company’s claims.145 Under these rules,   See, e.g., Gardemal v Westin Hotel Co., 186 F.3d 588 (5th Cir. 1999).   See Gian Franco Campobasso, Utet Giuridica (ed.), Diritto Commerciale (Diritto delle Società, 2007) 289. 144  So-called Konzernrecht: see Mads Tønnesson Andenæs and Frank Wooldridge, European Comparative Company Law (Cambridge University Press, 2009) 451–80 (providing an overview of the different definitions of group in several European countries). 145  See Paul Davies, Introduction to Company Law (Oxford University Press, 2010) 182–86; Zenichi Shishido, ‘Japanese Corporate Governance: The Hidden Problems of Corporate Law and Their Solutions’, 25 Del. J. Corp. L. 189, 199–200 (2000) (comparing US and Japanese fiduciary duties and the business judgment rule). 142 143

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Funders and other participants in international arbitration low or de minimis ownership through private equity investment, such as the 1% interest in the illustration in Subsection i, would make it difficult if not impossible for an investor to dictate company policy, including policy regarding management of a dispute.146 Owners or ‘affiliates’ can appoint managers and directors, if they have sufficient voting power, but even then corporate governance rules impose on those managers and directors fiduciary and related obligations to exercise independent judgment in managing corporate affairs, including claims held by the corporation.147 A funding agreement, in contrast to equity ownership, operates at a sub-corporate level. It may grant certain decisional prerogatives to a funder that will obviate, post-agreement, application of otherwise-applicable corporate governance rules. Managers and directors of a sophisticated commercial entity can certainly decide that the company’s interests are best served by ceding control over a claim in exchange for funding. Outside funding may facilitate pursuit of the claim that would otherwise not be possible or that would put too much strain on the company’s cash flow. However, the decision to enter into a funding agreement means that future decisions regarding that claim are no longer subject to ordinary corporate governance rules. As a result, a funder can exercise a degree of control over corporate decisions about a claim that exceeds the degree of control that could be exercised by an equity investor with the same level of financial interest. Going back to the earlier Figures 5.1 and 5.2, it is not only that a funder has an effectively 5.97 higher percentage interest in a party’s claim than an ordinary investor with an investment at the same dollar value. The form of the investment also allows the funder to by-pass corporate controls that would otherwise limit an investor’s ability to control decision-making regarding the claim, including arbitrator selection. Thus, whether an investor’s 10% interest in a party is considered sufficient to make it ‘an affiliate’ and so trigger disclosure obligations under the IBA Guidelines (and other national and international stands), a 10% interest in a dispute by a funder provides a much greater opportunity for control and should be treated differently. iii. The implications of intentionality In addition to structural distinctions, it is also important to consider the intentionality 5.98 behind dispute funding that is absent in general equity funding. Even assuming the same level of investment and ignoring the differing effects on corporate decision-making, thirdparty funding is distinguishable because the funder has intentionally identified the claim as the target for investment. The investment decision of a third-party funder, in other words, implies a specific, undiversified, interest in the dispute. This interest is distinct from the interest a general investor would have in a dispute, absent some extraordinary circumstance

146  See Jennifer G. Hill, ‘Regulatory Show and Tell: Lessons from International Statutory Regimes’, 33 Del. J. Corp. L. 819, 826 (2008) (explaining that the UK Combined Code on Corporate Governance of 2003 was based on principles designed to foster dialogue between independent directors and institutional investors, and to treat independent directors as a conduit between institutional investors and management); OECD, Principles of Corporate Governance (2004) (explaining, inter alia, the roles and limitations of investors, officers, and managers and tensions between investment amount and control rights); Shishido, ‘Japanese Corporate Governance’ 193 (‘This basic legal model of the corporation is shared by the United States and Japan . . . Shareholders are the residual claimants, who have the appropriate incentives to make discretionary decisions.’). 147  See OECD, Asia: An Overview of Corporate Governance Frameworks in 2007 (2007), 39, (illustrating that 13 Asian political entities recognize fiduciary duties for Board Members, nine of which distinguish between duties of loyalty and care); Shishido, ‘Japanese Corporate Governance’ 199–200 (comparing US and Japanese fiduciary duties and business judgment rule).

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Gamblers, Loan Sharks, and Third-Party Funders that would make the dispute of central importance to the corporation. Given this special interest in the dispute, a third-party funder arguably has a stronger incentive to provide oversight in management of the dispute. As described earlier, funder agreements and practices vary widely, so it may not be that in every case a funder acts on this incentive. The fact that not all funders may act on this incentive does not eliminate the potential concerns about conflicts raised by intentionality. 5.99 The intentionality of third-party funding differs in ways that should be taken into account

by disclosure obligations. This intuition finds an interesting analogue in the disclosure rules of the United States Supreme Court. Rule 29.6 of the Rules of Court of the Supreme Court requires disclosure of an ownership interest only when it exceeds 10%. Such a rule may be appropriate for general equity investors in parties. Rule 37.6, however, imposes a different rule when the investment involves intentionality similar to that of third-party funding: [A]‌brief filed under this Rule shall indicate whether counsel for a party authored the brief in whole or in part and whether such counsel or a party made a monetary contribution intended to fund the preparation or submission of the brief, and shall identify every person other than the amicus curiae, its members, or its counsel, who made such a monetary contribution. The disclosure shall be made in the first footnote on the first page of text.

Rule 37.6 applies only to amici, and not to parties. It is arguably a closer analogue to third-party funding than Rule 29.6, however, because it focuses on investment directly in the dispute. It aims, in other words, at identifying financial interests that create the potential for control over the amicus brief that are separate from traditional corporate governance mechanisms. 5.100 While the common supposition is that funders are pursuing a profit motive, nothing pre-

cludes funding by an interested party intent on affecting the outcome of a dispute for some other purpose. Hence Rule 37.6, which aims to ensure that the identity and interests of amici are represented in the caption and the contents of the brief. The fact that no rule comparable to Rule 37.6 currently applies to parties themselves may simply reflect the newness of thirdparty funding, and the fact that it is still prohibited in most jurisdictions in the United States. It is not difficult to imagine that the rule might change when third-party funding becomes more diffuse and prominent in US litigation.

5.101 In sum, the concentrated effect of funding on a claim, combined with the intentionality and

corporate governance issues described earlier, suggest that third-party funding in the aggregate creates a more increased risk of bias than equity investments at the same level.

d.  Purposeful analysis of conflicts 5.102 With these observations about the limits of proffered analogues to equity investors, it is useful to consider the issue not through possible analogies, but instead in light of the purpose of disclosure standards regarding conflicts of interest. As discussed in greater detail in Chapter 8, actual bias is almost impossible to measure, let alone prove, particularly ex post and with evidence independent of the substantive decision-making at issue.148 For that reason, conflict-of-interest standards are generally established to protect against heightened risk of bias, not actual bias.

148  See Morelite Const. Corp. v New York City Dist. Council Carpenters Ben. Funds, 748 F.2d 79, 84 (2d Cir. 1984) (referring to actual bias as an ‘insurmountable’ standard).

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Regulation of third-party funding in international arbitration The level of participation of third-party funders in the prosecution of any particular claim is 5.103 ultimately an empirical question, and may differ from case to case. The potential variability suggests that third-party funding raises unique concerns about conflicts. One complexity to developing meaningful guidance is that there are both quantitative and qualitative aspects to the issue. Efforts to amend the IBA Guidelines may need to take into account variations in funding arrangements that alter some of the assumptions relied on based on the working definition adopted here. A precise standard for disqualification may be elusive or may depend on additional facts regarding individual funding arrangements. Relevant additional factors may include such variables as the level of involvement in case management by a funder in a particular case (whether enshrined in the funding agreement or a de facto practice), whether any confidential information was obtained (or could be presumed to be accessible) in either relationship, as well as the level of funding relative to the value of a law firm, the regularity of funding arrangements with that firm, and other financial factors. Even in the current absence of clarity about when disqualification based on relationships 5.104 with funders might occur, existing ambiguities should not impede disclosure of the presence of funders in disputes so that potential conflicts can be considered. General Standard 3 of the IBA Guidelines instructs that any doubt as to whether an arbitrator should disclose should be resolved in favour of disclosure.149 Some funders (and parties and firms working with them) may prefer not to have to disclose the participation of funders, or regard it as unnecessary to have arbitrators disclose relations with them. That approach creates potentially undue risks for disruption of proceedings and effective challenges to final awards, as well as concerns about the legitimacy of arbitration itself. The extraordinary range of relevant variables that may affect assessment of non-disclosure at the 5.105 award enforcement stage and the absence of established precedent makes the risk of the latter impossible to assess. That ambiguity creates unnecessary risk to the investment, or unnecessary cost in defending challenges to an award that may otherwise be more readily complied with. Both harms can be avoided simply by disclosing. To the extent funders attempt in individual cases to minimize risk, they should arguably prefer systemic rules that reduce risk. Moreover, funders have a separate interest in avoiding the development of bad precedents in this area. An early judicial decision annulling or refusing enforcement to an award based on an undis- 5.106 closed third-party funding conflict with an arbitrator would affect not only that award, but also likely global perspectives on these still-evolving issues. It may also affect perceptions about the fairness and legitimacy of international arbitration—a risk the international arbitration community is undoubtedly less willing to incur. It is not possible at this early stage to predict whether funding arrangements will be systematically subject to disclosure in international arbitration, or how and when arbitrators will be required to disclose possible conflicts. Nevertheless, the potentially negative consequences for arbitral proceedings and awards in the event of later discovery should provoke a sober reassessment of wishful thinking.

C.  Regulation of third-party funding in international arbitration The primary thesis of this book is that international arbitration should expressly self-regulate its 5.107 participants, including third-party funders. As previewed in the Introduction and Chapter 1,   IBA Guidelines, general standard 3.

149

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Gamblers, Loan Sharks, and Third-Party Funders and taken up specifically in Chapter 6, this approach is related to, but distinct from, traditional notions of self-regulation of the professions in which institutions managed by members of a profession develop and enforce their own standards of conduct. ‘Self-regulation’ as used in this book is a proposal that professional regulation of participants in international arbitration be regulated at the international level and through existing arbitral processes and institutions. The need for regulation of third-party funding in international arbitration is perhaps more acute than for the other actors already examined because, on the one hand, the massive funds being injected into international arbitration practice have the potential to restructure the entire field. On the other hand, those who control those funds are completely unregulated and beyond the effective reach of any regulator. 5.108 National regulation of third-party funding arrangements to date operates mostly as an on-off

switch, with some jurisdictions permitting the practice and others prohibiting it. Few jurisdictions provide much actual guidance or regulation regarding the nature or structure of thirdparty funding arrangements. The guidance that is provided does not necessarily address the special issues in international arbitration. Meanwhile, as analysed earlier, national law regarding third-party funding, even in the seat of arbitration and even laws of those jurisdictions that prohibit the practice, may have little or no effect on third-party funding. Earlier parts of this chapter surveyed the issues and potential risks raised by the absence of regulation. This last section analyses the role of self-regulation, both as it exists among third-party funders and how it might be developed by the international arbitration community. 1.  Regulation of funders by funders

5.109 In 2011, the first-ever attempt at voluntary self-regulation by litigation funders was pub-

lished by the Association of Litigation Funders of England and Wales (ALF) for application to its members.150 The ALF Code was welcomed as an attempt to address funding practices that raise ethical concerns, but it has also been criticized. The three main criticisms of the Code are that its standards are too vague and restrictive, that it is completely voluntary, and that it lacks meaningful enforcement mechanisms.

5.110 By its terms the Code requires compliance by all members with the Code’s ‘standards of

practice and behaviour’, but membership in the ALF is voluntary. Substantively, the ALF Code consists of 10 general principles that regulate the formation, use, and termination of agreements concerning ‘funding of resolution of disputes within England and Wales’. As one commentator has pointed out, ‘[i]‌t is unclear whether this language refers solely to the location of the funder or the litigant being funded (“funding . . . within England and Wales”), or also to the situs of the dispute proceedings (“disputes within England and Wales”)’.151

5.111 With regard to relations with counsel, the ALF Code prohibits a funder from seeking ‘to

influence the Litigant’s solicitor or barrister to cede control or conduct of the dispute to the

150  Association of Litigation Funders of England and Wales, ‘Code of Conduct for Litigation Funders’ (2011) (UK), [ALF Code]. See also Scherer et al, ‘Third Party Funding of International Arbitration Proceedings—A View From Europe: Part II’ 654 (explaining that third-party litigation funders self-regulate in the UK and some US states through a code of conduct, but that no such legislation exists in continental Europe or the EU). 151 Kalicki et al., ‘Third-Party Funding in Arbitration: Innovations and Limits in Self-Regulation’.

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Regulation of third-party funding in international arbitration funder’,152 and a funder must refrain from taking steps ‘likely to cause’ the party’s attorney to violate professional obligations.153 The Code also provides that the funding agreement controls the extent to which the funder can provide input on decisions regarding settlement.154 Clause 2 states that funders are entitled to a share of the proceeds for successful claims but 5.112 prohibits them from seeking payment in excess of the proceeds of a successful claim. The ALF Code states, absent express agreement to do so, that funders are not required to provide security for costs, or to fund the payment of premiums for insurance against possible future awards of costs, or to finance such cost awards. The one exception to this limitation is if the funded party is in ‘material breach’ of the funding agreement. The Code does not define ‘material breach’, but in most funding agreements the party seeking funding makes representations and warranties. As predicates for the funder’s assessment of the claim, if these representations or warranties were determined to be false, that would most likely constitute a material breach.155 In fact, in the few funder-party disputes that have become public, the breaches asserted by the funder involved alleged misrepresentations by the funded party.156 In referencing the professional duties of attorneys, the ALF Code implicitly acknowledges 5.113 that UK solicitors and barristers are permitted, subject to applicable rules, to engage in fee sharing and referrals. The Code establishes confidentiality obligations for funders and provides that the funding agreement controls the extent of the funder’s ability to provide input on the party’s settlement decisions.157 The Code also provides that the funding agreement may provide for termination if the funder is reasonably dissatisfied with the merits of the dispute, reasonably believes the dispute is no longer commercially viable, or reasonably believes the party to be in material breach. While the Code offers no definition of what constitutes a ‘reasonable’ belief, it does limit funders’ discretion to terminate on these grounds.158 One important distinction between the funding agreements contemplated by the Code and 5.114 those pertaining to international arbitration is that the former provides for a binding opinion from a Queen’s Counsel to resolve any disputes,159 whereas international arbitration funding agreements usually themselves provide for international arbitration to resolve any disputes. As discussed previously, the submission of funding agreement disputes to arbitration facilitates the enforceability of funding agreements that involve parties or disputes from jurisdictions that prohibit or involve uncertainty about third-party funding agreements or their provisions. It is also an important reason why funding agreements in international arbitration are subject to much less control by national laws or national authorities than litigation funding arrangements.   ALF Code, cl. 7(c).   ALF Code, cl. 7(b). 154  ALF Code, cl. 9(a). 155  See Maya Steinitz, ‘A Model Litigation Finance Contract’, cl. 7.1 (2013), ; Smith, ‘Mechanics of Third-Party Funding Agreements: A Funder’s Perspective’ 20–21. 156  See, e.g., S & T Oil Equip. v Juridica Invs. Ltd., 2012 WL 28242 (5th Cir. 2012) (where Juridica, a company funding an ICSID arbitration between S & T Oil and the Romanian government, sued S & T for breach); Roger Parloff, ‘Investment Fund: We Were Defrauded in Suit Against Chevron’, CNN Fortune, 10 Jan. 2013, (discussing a suit by Burford Investment against plaintiffs formerly funded by Burford based in part on ‘material breaches of the Funding Agreement . . . through misrepresentation and other material failures’). 157  ALF Code, cl. 9(a). 158  ALF Code, cl. 10. 159  ALF Code, cl. 11(b). 152 153

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Gamblers, Loan Sharks, and Third-Party Funders 5.115 Several issues are left open by the ALF Code, most notably whether participation of third-party

funders should be disclosed. This omission may reflect the fact that there remains disagreement within the funding community about disclosure, and a reluctance by some to commit to disclosure absent a legal mandate.

5.116 Although it is an important development, the ALF Code has also drawn some criticism. Most

critics aim at the voluntary nature of the ALF Code and the lack of enforcement mechanisms. Two particularly strident critiques, one by the Institute for Legal Reform (ILR)160 and one by the European Justice Forum (EJF)161 are emphatic that the Code cannot replace the development of formal, binding regulation. The former even goes as far as advocating a complete ban on thirdparty funding.162 While these critiques focus mostly on application of the Code to litigation funding, the concerns they raise, including the substantive critiques, also have implications for international arbitration.

5.117 In their criticisms of the ALF Code, the ILR and EJF both emphasize the potential for con-

flicts of interest created when legal counsel develops close relationships with third-party funders. Thus, while the Code imposes on funders an obligation to ensure that parties receive outside legal advice regarding the funding agreement, critics note that the Code does not provide assurances that the outside legal advisor will be free from any interest in the funding of the claim.163 The critique, in other words, is that the Code does not require legal advice that is independent of the party’s existing counsel, which may have its own pecuniary interests in sustaining funding. As noted earlier, most often law firms themselves seek out or suggest funding for clients in order to continue representation.

5.118 In sum, the ALF Code may be a welcome first step by funders to clarify certain ‘best practices’

and signal what might be reasonable expectations. It can provide only limited guidance for international arbitration, however, because many unique issues arise in the arbitration context. While the ALF Code is an important and commendable step by funders in the UK, it cannot displace the need for similar efforts tailored specifically to the needs of international arbitration. 2.  Challenges in regulating third-party funders in international arbitration

5.119 As explored earlier in this chapter, international arbitration raises several unique issues relat-

ing to the participation of third-party funders. In addition to those issues explored earlier relating to professional conduct, there are also important structural challenges to regulating third-party funders. As an initial matter, arbitral tribunals are not likely to have jurisdiction over third-party funders. Disclosure of their involvement, however, may be essential for the effective resolution of certain issues, particularly issues relating to arbitrator conflicts and security for costs and awards for costs. In the future, parties may themselves seek to resolve this issue by incorporating into their arbitration agreements provisions that address specifically the potential participation of third-party funders. 160  The ILR report was issued on 22 December 2011, one month after the Code was released: see US Chamber of Commerce Institute for Legal Reform, ‘Comments on the Code of Conduct for Litigation Funders’ (2011),

[ILR Comments]. 161  European Justice Forum, ‘EJF Response to Lord Justice Jackson’s Final Report on the Costs of Civil Litigation’ (2010), [EJF Comments]. 162  See ILR Comments, 9; EJF Comments, 6. 163  See ILR Comments, 4, 8; EJF Comments, 11.

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Regulation of third-party funding in international arbitration In the meantime, significant challenges exist in determining the best manner and terms by 5.120 which to regulate third-party funders in international arbitration. First, unlike lawyers, arbitrators, and experts, the presence of third-party funders is a very new phenomenon without clear national precedents or established practices that provide a clear starting point for analysis. This murkiness means that most efforts to understand third-party funding have to date been based on analogical reasoning. For assessing potential conflicts of interest with arbitrators, are funders more like parties, like law firms, or like equity investors? Is due diligence into claims the same as corporate due diligence relating to a merger? For assessing extension of the attorney-client privilege, are funders more like co-parties or co-counsel, commercial parties with a shared interest or unrelated third parties? These inquiries recall the blind men’s elephant—each inquirer encounters a different 5.121 aspect of funding, but none of the assessments fully capture its essence.164 Even though each of the observed analogies carry some partial truth, they fail individually and collectively to understand the nature of the beast. The elephant metaphor is also apt because third-party funding is a proverbial elephant in the room even though, unlike the proverb, it is not simply being ignored, but its presence is largely hidden from view. This obscurity raises a second major challenge. More information is needed about actual practices to be able to assess the relevant issues. A clearer understanding of the nature, practices, and effects of third-party funders specifically in international arbitration is needed before meaningful regulation can be developed.165 This challenge is especially acute given the tremendous variation in funding arrangements. One principal challenge in determining appropriate mechanisms for regulating funders is 5.122 that, in the absence of clear established experience, debates about third-party funding are often laden with empirical assumptions and predictions. There is little hard data, however, and little understanding of how existing starting points may change over time. One oftrepeated empirical assumption, for example, is that funders only take on ‘good’ cases.166 This assumption provides a basis for third-party funding to have a ‘signalling effect’, which can indicate to opposing parties and arbitral tribunals that the claim has been carefully

  As the nineteenth century poem by John Godfrey Sax entitled The Blind Men and the Elephant begins: It was six men of Indostan To learning much inclined Who went to see the Elephant (Though all of them were blind), That each by observation Might satisfy his mind. Each blind man separately concludes that the elephant is like a wall, snake, spear, tree, fan, or rope, depending on which part of the elephant he has touched. They then have a heated debate over what an elephant really is, but the interchange only entrenches their partial understanding instead of allowing an amalgamated understanding of the whole animal. 165  This challenge contrasts efforts with arbitrators and counsel, where decades of practice and resulting experience could be distilled into meaningful standards, and regulatory controls could be introduced incrementally. See generally, Catherine A. Rogers, ‘The Vocation of the International Arbitrator’, 20 Am. U. Int’l L. Rev. 957 (2005). 166  Not everyone agrees with this assumption. According to one scholar: ‘These companies—like all sophisticated investors—will base their funding decisions on the present value of their expected return, of which the likelihood of a lawsuit’s success is only one component. The other component is the potential amount of recovery. If that potential recovery is sufficiently large, the lawsuit will be an attractive investment, even if the likelihood of actually achieving that recovery is small.’ Kantor, ‘Third-Party Funding in International Arbitration’ 74. 164

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Gamblers, Loan Sharks, and Third-Party Funders vetted and the funded party has a high probability of prevailing.167 From this premise, some argue that concerns about funding of frivolous claims are unfounded. There have, however, already been some relatively high profile cases that have highlighted the possibility of ‘funder’s remorse’.168 These cases suggest that ‘super’ or not, funders are not infallible. 5.123 It is also clear that all funders are created equal. The exceptionally high rates of return reported

by some funders require careful screening of cases.169 Other funders may underestimate the amount of due diligence required or simply not have the in-house expertise to assess effectively potential winning cases. In addition, future funders may be willing to accept higher risk for higher rates of return in long-shot cases, or simply to accept lower rates of return.

5.124 The effect of so-called ‘sub-prime’ claim funding170 may be of greater concern in light of the

prediction that ‘[i]‌n the not-too-distant future, it may well be that commercial litigations will be “bundled” and traded as securities on financial exchanges’.171 A derivatives market for funded claims could create the temptation, similar to those that led to the 2008 financial crisis, for funders to peddle sub-prime claims as high-return investments without investors having a meaningful ability to assess the risk of the bundled claims.

5.125 While the risks in the absence of regulation seem daunting, there are some vocal oppo-

nents to any form of regulation, even simply requirements that the presence of a third-party funder be disclosed. Some funders warn that increased transparency may diminish funding, increase abusive arguments aimed at ballooning case length and costs, or even influence tribunals with respect to ordering security for costs or assessing liability.172 Ultimately more information about these asserted concerns will be needed so that the costs of regulation can be evaluated against the potential gains.

5.126 Perhaps the first effort by the international arbitration community will be to sort out through

market forces the reputable, reliable funders from the ‘cowboys’. Arbitrators, counsel, and arbitral institutions have invested massive amounts of time and energy to establish their own legitimacy and that of international arbitration more generally. 167   See Steinitz, ‘Whose Claim Is This Anyway?’ 1305. See also, Colin F. Camerer, Behavioral Game Theory: Experiments in Strategic Interaction (Princeton University Press, 2003); Robert H. Mnookin and Lewis Kornhauser, ‘Bargaining in the Shadow of the Law: The Case of Divorce’, 88 Yale L.J. 950, 972–3 (1979). 168  ‘Buyer’s remorse’ is a sense of regret after having made a large purchase. For examples of some disastrous third-party litigation investments, see Stone & Rolls Ltd. v Moore Stephens [2007] EWHC (Comm) 1826, [2009] 1 A.C. (H.L.) 1391 (Eng.), (£89 million professional negligence claim initially won but dismissed on appeal due to fraud); Arkin v Borchard Lines [2005] EWCA (Civ) 655 (Eng.), (funder estimated total costs of £600,000 and a probable settlement of US$5–10m, but actual costs were around £1.3m, and potential exposure to £7.3m in costs). 169  See Veljanovski, ‘Third-Party Litigation Funding in Europe’ 420; Smith, ‘Mechanics of Third-Party Funding Agreements’ 33–36. 170  See Susan Lorde Martin, ‘Litigation Financing: Another Subprime Industry That Has a Place in the United States Market’, 53 Vill. L. Rev. 83 (2008); Susan Lorde Martin, ‘The Litigation Financing Industry: The Wild West of Finance Should Be Tamed Not Outlawed’, 10 Fordham J. Corp. & Fin. L. 55 (2004) (discussing abusive cases, including one in which a funding arrangement with an interest rate of 280%). 171  William A. Ruskin, ‘Securitizing litigation claims for fun and profit’ . 172  See Scherer et al, ‘Third Party Funding in International Arbitration in Europe: Part 1’ 218 (showing a consensus among investors present at a roundtable discussion for a ‘preference for non-disclosure of funding arrangements coupled with a suspicion that disclosure could adversely influence a tribunal’); Kalicki et al., ‘Third-Party Funding in Arbitration: Innovations and Limits in Self-Regulation’ (discussing concerns expressed by funders at a roundtable discussion on third-party funding); Maniruzzaman, ‘Third-Party Funding in International Arbitration—A Menace or Panacea?’.

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Regulation of third-party funding in international arbitration Funders who might be willing to take high risks for high stakes and to play fast and loose with the 5.127 norms that promote legitimacy in arbitral processes may threaten the fruits of that hard work. Any damage caused would be borne by arbitration specialists, however, since funders could simply find new vehicles for their investment. For these reasons, the international arbitration community may well expect funders to invest not only in individual cases, but also in initiatives that strengthen and reify more generally the international arbitral regime and its perceived legitimacy. Investment arbitration, a field that is already suffering challenges to its perceived legitimacy, 5.128 raises some special concerns. States may be justifiably concerned that the availability of thirdparty funding will increase the overall number of investor claims, aggravating concerns that the number of cases is already alarmingly high. Some have even expressed concern that thirdparty funders to State-parties could, through a funding agreement, exert strategic control over public policy issues.173 Finally, as a new phenomenon, it is not easy to predict how courts will respond if things 5.129 go wrong in particular cases. While this chapter has examined how most standard funding arrangements remain squarely outside the reach of any national courts, some commentators have already begun imagining worst-case scenarios that may provoke national legislative or judicial action. Specifically, commentators have considered the prospect that third-party funding may be manipulated to be ‘a channel for laundering illegally obtained money’,174 ‘cause pressure to be put on arbitrators ex ante during the proceedings’, to ‘finance liability actions against the arbitrators or arbitral institutions more readily than the parties which they funded’,175 or use (misuse?) information obtained in a funded case in other cases or as leverage to play both sides of the same case. This final concern may not be entirely hypothetical.176 A litigation case against Chevron 5.130 brought in Ecuador funded by a prominent third-party funder seems to provide a particularly colourful cautionary tale. In that case, the funder of the plaintiffs’ case later filed a declaration on behalf of Chevron against the plaintiffs at a time when it appears the funder still had a financial interest (later renounced) in the plaintiffs’ underlying claim.177 It is   See Maniruzzaman, ‘Third-Party Funding in International Arbitration—A Menace or Panacea?’.   Edouard Bertrand, ‘The Brave New World of Arbitration: Third-Party Funding’, 29 ASA BULL. 607, 614 (2011). 175   Bertrand, ‘The Brave New World of Arbitration: Third-Party Funding’ 615 (surmising that ‘[t]‌here is a reasonable prospect that TPF will raise the risk level of arbitrators’). 176   See Chevron and Burford, ‘Chevron and Burford Joint Statement Regarding the Lago Agrio Litigation’, 17 Apr. 2013, . It is unclear whether the worst allegations about misconduct in this case—either by plaintiffs’ counsel or the funder—will ever be proven. The case, however, provides a law professor’s dream hypothetical to demonstrate that funders can ‘switch sides’ or ‘play both sides’ of the same dispute in the absence of any legal prohibitions and in a manner unthinkable for counsel with whom they work and share confidential information. See Blog, ‘The Ugly Truth Behind the Burford-Chevron Settlement’, 23 Apr. 2013, . 177  See Parloff, ‘Investment Fund’; ‘The Ugly Truth’ (renouncing Burford interest in Lago Agrio claim); Letter from Burford Grp. to Lago Agrio Plaintiffs, 29 Sept. 2011, (terminating Burford’s funding agreement with the Lago Agrio plaintiffs); Amended Declaration of Respondent and Joint Motion to Strike, Chevron Corp. v Donziger, No. 11-CV-0691 (LAK) (S.D.N.Y. 30 July 2013), 21 and Exs. 21–23, 29–31, 57–59 (evidencing continuing business relations between Burford and Patton Boggs through March 2013, Burford communications with Chevron as early as 2010, and Burford collaboration with Chevron outside counsel who later became Burford Managing Director). 173 174

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Gamblers, Loan Sharks, and Third-Party Funders alleged, but uncertain, that the funder’s declaration contained confidential information.178 Subsequently, the funder even issued a ‘joint statement’ with Chevron denouncing the plaintiffs and their counsel in the underlying case.179 5.131 Attorneys may, and in some instances are required to, withdraw from representing clients,

particularly when the client has engaged in criminal wrongdoing and used the attorney’s services to do so.180 Professional ethical rules, however, prohibit those attorneys from then affirmatively switching sides and using confidential information gained in the original representation against the former client.181 No such rules prohibit similar conduct by third-party funders.182

D. Conclusion 5.132 Third-party funders are a fitting finale to this first Part of the book because the regulation of

funders implicates many of the same challenges that arise with other actors, but in even more extreme and dramatic ways. On the one hand, as among arbitrators, counsel, and experts, funders are the group that are the least tethered to any meaningful national regulation. Their participation in international arbitration is also remarkably new by comparison to these other actors.

5.133 For these reasons, the issues relating to funders’ participation illustrate well the potential advan-

tages of regulation being implemented at the international level and within international arbitral processes and mechanisms. In this respect, issues relating to third-party funders frame various themes that have been implicit in the first five chapters and will become explicit in Part II.

5.134 Professional regulation, particularly of attorneys, is often viewed in static terms, and based

on an assumption that those being regulated operate in a professional netherworld insulated from market forces and financial interests. These assumptions pervade much discourse over professional ethics and regulations, even in the relatively enlightened world of international arbitration. This view of ethics colours the debate, discussed later in Chapter 8, over whether

  See Parloff, ‘Have You Got a Piece of This Lawsuit?’ 68.   Chevron and Burford, ‘Chevron and Burford Joint Statement Regarding the Lago Agrio Litigation’, 17 Apr. 2013, . 180  See Model Rules of Prof ’l Conduct, R. 1.16(a)(1) (2013) (US) (‘[A]‌lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if . . . the representation will result in violation of the rules of professio nal conduct or other law.’). 181  See, e.g., Model Rules of Prof ’l Conduct, at R. 1.8(b) (‘A lawyer shall not use information relating to representation of a client to the disadvantage of the client unless the client gives informed consent’); Model Rules of Prof ’l Conduct. at R. 1.9(c) (‘A lawyer who has formerly represented a client in a matter . . . shall not thereafter . . . use information relating to the representation to the disadvantage of the former client . . . or . . . reveal information relating to the representation.’). 182  It may well be that the funding agreement itself provides contractual protections against switching sides and disclosing or misusing confidential information. Some scholars have argued that such contractual protections would be sufficient. See Sebok and Wendel, ‘Duty in the Litigation-Investment Agreement’ 32 (proposing that the most effective form of regulation of third-party funders would be ‘contract law [which] is better suited than regulation or tort liability to minimize both parties’ risks inherent in litigation’). These arguments seem to discount the possibility that malfeasance by a funder could be born not only by the funded party, but by other litigants and the legal system in which the case is being adjudicated. Contractual remedies for the funded party may not be sufficient to rectify all harm caused, and seem to intentionally take an unduly blinded view of the funding arrangement as an exclusively bilateral agreement. 178 179

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Conclusion arbitrators are ‘justice providers’ or ‘service providers’. It is increasingly used as a baseline for charting that reported demise of lawyers and law firm practice, and it inspires much of the critique about party-appointed experts. This artificial separation of professional from market forces also inspires the critiques, discussed in the introduction to this chapter, about third-party funding as a commodification of justice. While seeming to be a twenty-first century malady, the lament that justice is being lost to market 5.135 forces has a long, distinguished history. In 1916, US attorney Julius Henry Cohen wrote a book The Law: Business or Profession?183 In it, his insistence that we must maintain a stark dichotomy between ‘professions’ and ‘businesses’ echoed these various debates. Even back then, however, it was denied rhetorically, but in practice lawyers were active in market-based activities, not hermetically sealed away from them. By way of example, attorney advertising has long been deplored as the seminal distinction 5.136 between law practice as a profession instead of a business.184 Even at a time in US history, however, when the ‘professional’ model was sacrosanct, such notables as Abraham Lincoln engaged in advertising and, while sitting as US Supreme Chief Justice, John Marshall provided a testimonial for an advertisement for an attorney, David Hoffman, who ironically was the soon-to-be author of the first American code of legal ethics.185 Professional regulation that rejects the market function and market forces that influence and 5.137 even animate any system of justice is doomed to be of limited utility. A more constructive and realistic approach is to craft substantive rules in light of the specific functions and activities that relevant actors actually engage in. Particularly with third-party funders, abstracted ideals are of little utility. Recognizing the marketplace in which justice occurs also means that enforcement of pro- 5.138 fessional norms should be embedded in the mechanisms that are most efficient at ensuring compliance, or remedying non-compliance. Part II of this book takes up the conceptual and practical challenges involved in implementing this prescription.

  See Julius Henry Cohen, The Law: Business or Profession? (Banks Law Publishing Co., 1916).   See Cohen, The Law: Business or Profession? 173–308; Russell G. Pearce and Pam Jenoff, ‘Nothing New Under the Sun: How the Legal Profession’s Twenty-First Century Challenges Resemble Those of the Turn of the Twentieth Century’, 40 Fordham Urb. L.J. 481, 486 (2012). See also ABA, Canons of Ethics, Canon 27 (1908), (‘The most worthy and effective advertisement possible, even for the young lawyer, and especially with his brother lawyers, is the establishment of a well-merited reputation for professional capacity and fidelity to trust.’). 185  These historical references, and additional analysis on these issues with respect to the US legal market and current debates about ethical regulation in the United States, can be found in Ted Schneyer, ‘“Professionalism” as Pathology: The ABA’s Latest Policy Debate on Nonlawyer Ownership of Law Practice Entities’, 40 Fordham Urb. L.J. 75 (2012) (source of advertising examples); Pearce and Jenoff, ‘Nothing New Under the Sun’. 183 184

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Part II STAKING OUT THEORETICAL BOUNDARIES AND BUILDING THE REGIME

6 CHANTICLEER, THE FOX, AND SELF-REGULATION Thou shalt namoore, thurgh thy flaterye, Do me to synge and wynke with myn ye; For he that wynketh, whan he sholde see, Al wilfully, God lat him nevere thee! Chanticleer the Rooster in Chaucer’s Nun’s Priest’s Tale* Les hommes ont oublié cette vérité, dit le renard. Mais tu ne dois pas l’oublier. Tu deviens responsable pour toujours de ce que tu as apprivoisé. Antoine de Saint-Exupéry, Le Petit Prince**

‘Regulation’ and ‘self-regulation’ are ‘normatively loaded term[s]‌’.1 The word ‘regulation’ 6.01 is more likely to send shivers down the spine than to inspire confidence. The main reason is that regulation is usually conceived of as a top-down, command-and-control operation; it is the imposition of coercive state power through rules generated by pointy-headed state bureaucrats. The word ‘regulation’ brings to mind enormous tomes of convoluted fine print and picayune restrictions.2 It is a synonym for unnecessary red tape.3

*  Geoffrey Chaucer, Canterbury Tales, lns 3429–32 (‘You shall no more, with any flattery, / Cause me to sing and close up either eye. / For he who shuts his eyes when he should see, / And wilfully, God let him ne’er be free!’). **  Antoine de Saint-Exupéry, The Little Prince, ch 21 (1943) (‘ “People have forgotten this truth”, the fox said. “But you mustn’t forget it. You become responsible forever for what you’ve tamed”.’). 1  Julia Black, ‘Decentring Regulation: Understanding the Role of Regulation and Self-Regulation in a “PostRegulatory” World’, 54 Current Legal Probs. 103, 115 (2001). 2  According to the Organisation for Economic Co-operation and Development (OECD) definition of ‘regulation’, it includes a dizzying and tangled array of sources: ‘Constitutions, parliamentary laws, subordinate legislation, decrees, orders, norms, licenses, plans, codes and even some forms of administrative guidance can all be considered as “regulation.” ’ OECD, Recommendation of the Council of the OECD on Improving Quality of Government Regulation, C(95)21/FINAL, n. 2, . 3  This perception is captured in the image of the Global Arbitration Review—a man in a suit tied up in red tape and unable to move—used to illustrate the debate between Chief Justice Sundaresh Menon and Toby Landau, QC about the need for professional regulation in international arbitration. See Allison Ross, ‘Regulation Debate Continues in Singapore’, Global Arb. Rev., 13 June 2012, (quoting Toby Landau as saying international arbitration risks ‘regulating ourselves out of existence’).

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Chanticleer, the Fox, and Self-Regulation 6.02 ‘Self-regulation’, meanwhile, is often derided as ‘self-serving, self-interested, lacking in sanc-

tions, beset with free rider problems, and simply a sham’.4 It is an indicator ‘that the government is not serious about an issue’.5 It prompts the age-old question: Should foxes ever be left to guard the henhouse?6

6.03 As debates about ethical regulation have bubbled up in international arbitration, some

commentators have issued a health warning of sorts against what has been called ‘Legislatis’, meaning the urge to legislate and use more rules to solve problems.7 Other commentators have questioned more specifically whether it would be appropriate for international arbitration to ‘usurp’ from national authorities the inherently public function of regulating professionals.8 These critics argue that professional regulation is bound up with national public policy and inextricably intertwined with national cultural preferences.9 Still others protest that ethical regulation in international arbitration would be unnecessary meddling in a system that is doing just fine without it, thank you very much.10

6.04 This chapter seeks not only to answer these critiques, but to reframe the regulatory debate

in international arbitration, including how foxes and henhouses feature in that debate.The primary thesis of this book is that international arbitration must undertake express self-regulation of those who participate in its processes. The need for ethical regulation, particularly with regard to attorneys, has been the subject of heated debate, played out most recently in a series of publications and events.11 To move this debate forward, it is necessary to debunk

  See Black, ‘Decentring Regulation’ 115.   See Black, ‘Decentring Regulation’ 115. 6   Critiques about self-regulation in international arbitration have been most vehement among critics of investment arbitration. See, e.g., ‘Who guards the guardians? The conflicting interests of investment arbitrators’, Corp. Eur. Observatory, 27 Nov. 2012, (discussing the legitimacy of arbitration in its current form). 7  Michael Schneider, ‘The Essential Guidelines for the preparation of Guidelines, Directives, Notes, Protocols and Other Methods Intended to Help International Arbitration Practitioners to Avoid the Need for Independent Thinking and to Promote the Transformation of Errors into “Best Practices”’, in Laurent Lévy and Yves Derains (eds.), Liber amicorum en l’honneur de Serge Lazareff (2011) 563 (draft on file with author). 8   Michael Schneider, ‘President’s Message: Yet another opportunity to waste time and money on procedural skirmishes: The IBA Guidelines on Party Representation’, 31:3 ASA Bull. 497, 499 (2013) (‘While the [arbitral procedures] may be regulated by the parties to an arbitration and by the arbitral tribunal appointed by them, [ethical rules] fall within the responsibility of those professional bodies that regulate the exercise of the legal profession.’). 9  For instance, Professor Jan Paulsson has cautioned that ‘good rules that are prospective’ or ‘robust’ rules for regulating international arbitration ‘might be too robust to be tolerated by [national] legal systems’ which might overrule those regulations. Therein ‘lies a danger of overreaching self-regulation and turning it into something which is a peril for the process’. Jan Paulsson, London School of Economics, Is Self-Regulation of International Arbitration an Illusion?, 4th LSE Arbitration Debate, 9 May 2013, 34:34, . Paulsson also argues that in arbitration involving States as parties, States are unlikely to accept international regulation of its counsel. LSE Debate, 43:40 (hereafter ‘LSE Debate’) (‘The politics of adjudication under public international law may make it unlikely that disputing states will accept a lot of regulation.’). 10  There are several versions of this line of argument. There is the classic if-it-ain’t-broke-don’t-fix-it argument. See Comments of Sundaresh Menon, in LSE Debate. Others argue arbitration is becoming ossified with too many rules and regulations, and ‘more regulation’ will only aggravate that problem. See Ross, ‘Regulation Debate Continues in Singapore’. Still others argue that the elite core of international arbitration know how to conduct themselves and are unlikely to benefit from either formal expression of those obligations or imposition of penalties for lapses. See LSE Debate (comments of Toby Landau). 11  See Sebastian Perry, ‘Policing Ethical Conduct: Menon and Paulsson Debate Regulation’, Global Arb. Rev., 6 June 2013, (‘[A]‌controversy has raged ever since as to whether there really is a 4 5

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Chanticleer, the Fox, and Self-Regulation some of the underlying myths that animate it, to replace these mistaken assumptions with more robust and meaningful definitions of the term ‘regulation’, and to examine existing forms of self-regulation in international arbitration. Building on the admonition of de Saint-Exupéry’s wise fox, this chapter urges international arbi- 6.05 tration to be responsible for those professionals it has ‘tamed’ in its processes. Drawing contrast with Chanticleer’s narrow escape,12 it argues that responsible regulation in international arbitration can no longer be resisted by self-satisfied, closed-eyed crowing that regulation is not needed. The first Part of this book established that all professionals are in need of greater guidance and accountability in international arbitration. This chapter demonstrates that professional self-regulation would not be a radical innovation. It is, instead, an inevitable evolutionary development. It is similar to prevailing trends toward global self-governance in other transnational activities and emerges out of existing predicates in international arbitration practice itself. This chapter begins in Section A by defining the terms ‘regulation’ and ‘self-regulation’, both 6.06 as general concepts and as they apply to professional conduct. The remainder of the chapter builds on these definitions. It argues that internal mechanisms and procedures maximize the competence of a regulatory regime like international arbitration. Meanwhile, competing interests within international arbitration, as well as national bulwarks, prevent self-regulation from devolving into a race to the bottom. After establishing the definition and parameters of self-regulation in Section A, Section B 6.07 argues that international arbitration is already engaged in the self-regulation of international arbitrators. Specifically, the ethical standards for arbitrators developed by members of the international arbitral community are more precise, effective, and professionally relevant than those developed by national legislatures and courts.13 Arbitral institutions directly oversee the selection, appointment, and challenge processes under their rules. In performing these functions, arbitral institutions act as primary regulators, both in developing applicable standards and enforcing them. National courts remain available as a final bulwark. In some systems where permitted under national law, they rule directly on arbitrator challenges; in other systems, they review awards allegedly affected by arbitrator misconduct in annulment or enforcement proceedings. National courts, however, conduct this review in only a small fraction of international arbitrations. Their conclusions differ from arbitral institutions’ decisions on arbitrator challenges in a smaller fraction of that already small fraction. In other words, both by design and in practice, national courts provide a minimalistic backstop to self-regulation rather than serving a primary regulatory function. There is clearly room for improvement in regulation of international arbitrators, including 6.08 increased transparency and accountability in the selection process. These topics are taken up

“systemic failure” on the part of institutions, arbitrators, and counsel to maintain minimum standards of ethical conduct and, if so, what form of intervention could remedy it.’); Sebastian Perry, ‘Minds Meet over Regulation’, Global Arb. Rev., 5 June 2013 (‘A much-anticipated debate between Sundaresh Menon and Jan Paulsson on the desirability of a regulatory framework for international arbitration ended with a surprising consensus on the need for arbitral institutions to take the lead in policing ethical conduct.’). 12 In The Nun’s Priest’s Tale, Chanticleer lets down his guard of a henhouse when a clever fox flatters him into demonstrating his lovely singing voice, with neck outstretched and eyes closed. As Chanticleer does so, the fox takes advantage of Chanticleer’s distraction and self-absorption to attack both him and the henhouse. Ultimately, Chanticleer prevails and vows never again to let pride and self-indulgence interfere with his duties. 13  See paras 6.58–6.96.

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Chanticleer, the Fox, and Self-Regulation later in Chapters 8 and 9. The basic framework for arbitrator regulation, however, has proven to be more effective and reliable than might otherwise be imagined or implemented through any external or national regulatory processes. 6.09 Based on the general outlines of international arbitrator regulation, Section C proposes a

model for attorney regulation that implements the essential structural features that have made arbitrator regulation successful. Specifically, these proposals are for the promulgation and enforcement of ethical obligations at an international level and by private entities within international arbital processes. These proposals mean that national bar authorities and courts would not funcition as primary regulators, but instead as essential, albeit limited secondary regulators.

A.  Defining self-regulation 6.10 A growing number of commentators have been calling for development of express regulation

of counsel in international arbitration.14 These proposals, however, have also been met with knitted-brow disdain. Noted arbitration professionals publicly lament that ‘more’ professional regulation in international arbitration might ‘cure the disease but kill the patient’.15 The admonition to all is that, if international arbitration were to attempt self-regulation, it would run the risk of ‘regulating [itself ] out of existence’.16

6.11 These articulated concerns, it will be shown, are predicated on outdated and ultimately mis-

leading assumptions about what is meant by ‘regulation’, ‘regulators’, and ‘self-regulation’. This Part unpacks the meaning of these terms and locates them in modern debates among political scientists and policy analysts about the nature of transnational and global governance.

14  Doak Bishop and Margrete Stevens, ‘The Compelling Need for a Code of Ethics in International Arbitration: Transparency, Integrity and Legitimacy’, in Albert van den Berg (ed.), Arbitration Advocacy in Changing Times (15 ICCA Congress Series, 2010) 391; Charles N. Brower and Stephan W. Schill, ‘Regulating Counsel Conduct Before International Arbitral Tribunals’, in Pieter Bekker et al. (eds.), Making Transnational Law Work in the Global Economy: Essays in Honor of Detlev Vagts (2010) 488 (‘At issue may ultimately be the legitimacy of the international arbitral system as a whole, in particular inasmuch as . . . [uniform legal ethics for counsel] operate not only retrospectively . . . but also prospectively as a mechanism of global governance.’); David J.A. Cairns, ‘Advocacy and the Functions of Lawyers in International Arbitration’, in M.Á. Fernández-Ballesteros and D. Arias (eds.), Liber Amicorum Bernardo Cremades (2010) 291; Margaret L. Moses, ‘Ethics in International Arbitration: Traps for the Unwary’, 10 Loy. U. Chi. Int’l L. Rev. 73, 80 (2012) (‘An international code could help provide transparency and certainty for proper attorney conduct, help level the playing field, contribute to the fairness of the procedure, and improve the confidence of the participants and the public in the arbitration process.’); Doak Bishop, Keynote Address at the ICCA Congress on 26 May 2010, ‘Ethics in International Arbitration’, in van den Berg, Arbitration Advocacy in Changing Times 383, 388 (‘Although there have been no catastrophes to this point, the International Arbitration system is at least subject to reasonable criticism without its own transparent Code of Ethics, and we need to ensure the future integrity and legitimacy of the system.’). See also Carolyn B. Lamm et al., ‘Has the Time Come for an ICSID Code of Ethics for Counsel?’ in Karl Sauvant (ed.), 2009–2010 Y.B. Int’l Inv. L. & Pol’y (2010) (answering the titular question in the positive); Cyrus Benson, ‘Can Professional Ethics Wait? The Need for Transparency in International Arbitration’, 3 Disp. Resol. Int’l 78, 83 (2009) (answering the titular question in the negative); Doak Bishop and Margrete Stevens, ‘Advocacy and Ethics in International Arbitration: International Code of Ethics for Lawyers Practicing Before International Arbitral Tribunals’, in van den Berg, Arbitration Advocacy in Changing Times; Günther Horvath, ‘Guerrilla Tactics in Arbitration, An Ethical Battle: Is There Need for a Universal Code of Ethics?’, in Christian Klausegger, Peter Klein et al. (eds.), Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 297 (answering titular question in the positive). 15  Ross, ‘Regulation Debate Continues in Singapore’ (quoting Toby Landau). 16  Ross, ‘Regulation Debate Continues in Singapore’ (quoting Toby Landau).

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Defining self-regulation 1.  The meaning of ‘regulation’ Resistance in the international arbitration community to proposals for express ethical regulation 6.12 or even self-regulation was predictable, if not inevitable. When ‘regulation’ is translated to mean traditional, heavy-handed bureaucratic controls, the term itself is a welcome mat for opposition. By now, however, this view of regulation, and the notion that States have a monopoly on the production of regulation, are understood in academic literature as over-simplified relics. At a descriptive level, scholars from fields as disparate as political science, economics, legal 6.13 pluralism, sociology, psychology, and others, have demonstrated the ‘obvious’ fact that ‘the state does not . . . exercise a monopoly in regulating the lives of citizens’.17 Even within the confines of a single State, a host of forces impose order on society and ‘regulate’ its members.18 These insights have created pressure for a new, more modern definition of ‘regulation’, even 6.14 if efforts have not yet distilled into consensus. As Christine Parker explains: Definitions of regulation range from ‘a type of legal instrument’, to any area of law that aims at social control, to any intentional ‘process of controlling behavior with reference to some standard or purpose’, to ‘an outcome of an interaction of forces and actors’, to and even ‘a property of self-correction’. ‘Regulators’ can be state institutions, non-state actors, social and economic forces (e.g., markets, norms, or even language), or physical or virtual technologies.19

Without parsing the nuanced reasons for variances among competing definitions, it is useful to adopt a general definition for the purposes of this chapter. Julia Black defines regulation as: [T]‌he sustained and focused attempt to alter the behaviour of others according to defined standards or purposes with the intention of producing a broadly identified outcome or outcomes, which may involve mechanisms of standard-setting, information-gathering and behaviour modification.20

This definition refocuses the definition of regulation on the objectives (controlling behaviour) and the functions required to accomplish that (setting substantive standards and enforcement). 17   Christine Parker, ‘The Pluralization of Regulation’, 8 Theoretical Inq. L. 349, 349 (2008). See also Peer Zumbansen, ‘Sustaining Paradox Boundaries: Perspectives on Internal Affairs in Domestic and International Law’, 15 Eur. J. Int’l L. 197, 201 (2004) (‘Comparative studies of developments in regulatory law and policy in Western states over the past three decades have shown a widespread movement away from a top-down approach in public governance to an increasingly hybrid interaction of public and private actors.’) (reviewing A. Claire Cutler, Private Power and Global Authority (Cambridge University Press, 2003)). 18  See Larry Catá Backer, ‘Inter-Systemic Harmonization and its Challenges for the Legal-State’, in Sam Muller et al. (eds.), The Law of the Future and the Future of the Law (2011) 427, 431–2, (‘[T]‌he greatest challenge for law in the twenty-first century is to avoid becoming irrelevant in an emerging global governance order in which corporations use contracts to regulate their supply chains, states reconstitute themselves as private market actors and private enterprises assert regulatory control of markets through authoritative systems of assessment and rating.’); Paul Schiff Berman, ‘Global Legal Pluralism’, 80 S. Cal. L. Rev. 1155, 1170 (2007) (‘[M]any community affiliations, such as those held by transnational or subnational ethnic groups, religious institutions, trade organizations, unions, Internet chat groups, and a myriad of other “norm-generating communities” may at various times exert tremendous power over our actions even though they are not part of an “official” state-based system.’). 19  Parker, ‘The Pluralization of Regulation’ 350–1 (citations omitted). For a thoughtful analysis on the multiplicity of meanings attributed to the term ‘regulation’, see Black, ‘Decentring Regulation’ 128–36. 20  Julia Black, ‘Critical Reflections on Regulation’, 27 Austl. J. on Legal Phil. 1, 26 (2002). Mapping the essential features of this definition onto the topics of this chapter, regulation can be said to be a sustained and focused attempt to ensure that the conduct of arbitrators, attorneys, experts, and third-party funders comports with ethical standards in order to ensure the fairness of arbitral outcomes.

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Chanticleer, the Fox, and Self-Regulation 6.15 The redefinition of regulation has, in turn, ushered in a range of theories and proposals about

how and when regulation is most effective, and which mechanisms are optimal to accomplish desired ends.21 The result is a vigorous debate about which strategy, or combination of strategies, is optimal for ensuring compliance with regulatory objectives.22

6.16 With respect to international and cross-border activities, the obsolescence of traditional

notions of regulation is even more apparent. As corporate enterprises have become multi­ national and supply chains have gone global, individual States have become largely incapable of imposing conventional domestic ‘regulation’ on transnational activities.23 This regulatory impotence has been demonstrated in areas as diverse as the environment, health and safety, workers’ rights, human rights, financial reporting standards, and the like.24

6.17 At the transnational level, regulation through conventional forms—treaties and intergov-

ernmental organizations—has also proven to be ineffectual.25 As Stacie Strong explains, ‘Formal regulatory bodies . . . find it difficult to respond rapidly to threats of international legal harm, even though the pace and integrated nature of modern globalized society means that developments in one jurisdiction can have a nearly instantaneous effect elsewhere in the world’.26 Just as State-centric views of domestic regulation have broken down, scholarship regarding global regulation reveals ‘what is really going on’ at the transnational level in the absence of effective traditional State regulation.27 These assessments are called variously, and with significant overlap, ‘New Governance’,28 ‘transnational norm theory’,29 ‘global

  Jodi L. Short, ‘The Paranoid Style in Regulatory Reform’, 63 Hastings L.J. 633, 634 (2012).   For an overview of these regulatory shifts, see Orly Lobel, ‘The Renew Deal: The Fall of Regulation and the Rise of Governance in Contemporary Legal Thought’, 89 Minn. L. Rev. 342, 423–32 (2004). 23   See Catá Backer, ‘Inter-Systemic Harmonization’ 429 (‘Much that passes for law-making remains at this level of nineteenth century conceptions, even as the foundations for those conceptions—the superiority of the state and of the positive law produced by a sovereign demos—has been severely challenged.’); Michael Torrance, ‘Persuasive Authority Beyond the State: A Theoretical Analysis of Transnational Corporate Social Responsibility Norms as Legal Reasons Within Positive Legal Systems’, 12 German L.J. 1573, 1579 (2011) (‘The development of . . . transnational normative systems amongst private actors . . . is associated with the limitations of a State-centric definition of domestic and international law that is perceived to be “incapable” of delineating fully the parameters of social conduct (including the social conduct of corporations) in relation to other social actors.’); Marc Galanter, ‘Planet of the APs: Reflections on the Scale of Law and Its Users’, 53 Buff. L. Rev. 1369, 1399–1401 (2006) (‘In the past 30 years the business corporation has achieved an ascendancy over government entities’). 24  Olaf Dilling, ‘From Compliance to Rulemaking: How Global Corporate Norms Emerge from Interplay with States and Stakeholders’, 13 German L.J. 381 (2012). 25  Kenneth W. Abbott and Duncan Snidal, ‘Strengthening International Regulation Through Transnational New Governance: Overcoming the Orchestration Deficit’, 42 Vand. J. Transnat’l L. 501, 577–8 (2009) (discussing the deficiencies of contemporary transnational governance); Catá Backer, ‘Inter-Systemic Harmonization’ 428 (‘At the start of the twenty-first century, governance harmonization has become a more complicated, more desired, and yet more elusive enterprise.’). 26  S.I. Strong, ‘Regulatory Litigation in the European Union: Does the US Class Action Have a New Analogue?’ 88 Notre Dame L. Rev. 899, 914 (2012). 27  See Robert Wai, ‘Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in an Era of Globalization’, 40 Colum. J. Transnat’l L. 209 (2002); Dan Danielson, ‘How Corporations Govern: Taking Corporate Power Seriously in Transnational Regulation and Governance’, 46 Harv. Int’l L.J. 411 (2005). 28  See Saule T. Omarova, ‘Wall Street as Community of Fate: Toward Financial Industry Self-Regulation’, 159 U. Pa. L. Rev. 411, 428 (2011) (‘The world as seen through the theoretical lens of New Governance is a complex, dynamic, and intricately interconnected universe in which various governmental and non-governmental forces constantly negotiate the boundaries between public and private spheres of economic and social life.’). 29  See Torrance, ‘Persuasive Authority Beyond the State’ 1582. 21

22

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Defining self-regulation governance’,30 ‘global legal pluralism’,31 ‘new regulatory initiatives’,32 ‘ “hard” and “soft” law in international governance’,33 and ‘global law without a state’.34 What these various theories and models all have in common is that they identify a declining 6.18 role of formal, centralized state action in conjunction with a rise, and even primary role, for private actors and networks in implementing what are largely voluntary new regulatory regimes.35 The reasons for this ‘privatization and internationalization of governance’ is that ‘governments lack [the] requisite technical expertise, financial resources, or flexibility to deal expeditiously with ever more complex and urgent regulatory tasks’.36 The observed, measurable result is that, in global contexts, regulatory solutions to global governance problems tend to involve more market-oriented, participatory, decentralized, and self-regulatory strategies. These strategies complement, and sometimes even displace, traditional State-based regula- 6.19 tion. By internalizing monitoring and enforcement, and delegating it to insiders within the institutions being regulated, self-regulation can rely on specialized knowledge, technical capacity, proximity, and social capacity that government regulators lack.37 These strategies can increase coverage and effectiveness. For example, in one study of the pharmaceutical industry, internal corporate inspectors were better able to detect problems, audit compliance, and trap suspected wrongdoers than government officials.38 Another example of largely successful self-regulation is the City Code on Takeovers and Mergers, a body of rules written and administered by the Panel on Takeovers and Mergers that is staffed by personnel on secondment (professional exchange) from the professional community it regulates.39 While the shift toward private, self-regulatory regimes in global contexts is essential, and per- 6.20 haps even inevitable, it also raises important questions and concerns.40 How and under what conditions can self-regulation be effective, reliable, and legitimate? When and how, in other words, can foxes be responsible guards of the henhouse? The importance of these questions is perhaps most acutely demonstrated by the failures of self-regulation in the global financial

30  See Dilling, ‘From Compliance to Rulemaking’ 381 (‘In many cases, such regulatory issues therefore cannot be resolved within a single territory. Instead, they require the involvement of global players, such as civil society, business actors, or international organizations, who can often find pragmatic solutions to global problems, even if they lack the formal authority to do so.’). 31  Berman, ‘Global Legal Pluralism’ 1170; Parker, ‘The Pluralization of Regulation’ 349. 32  See Abbott and Snidal, ‘Strengthening International Regulation Through Transnational New Governance’ 505. 33  See Gregory C. Shaffer and Mark A. Pollack, ‘Hard vs. Soft Law: Alternatives, Complements, and Antagonists in International Governance’, 94 Minn. L. Rev. 706, 707 (2010). 34  See Gunther Teubner, ‘Global Bukowina: Legal Pluralism in the World Society’, in Gunther Teubner (ed.), Global Law Without A State (1997) 3. These developments are also sometimes referred to as ‘lex mercatoria’, though that term is not used here given its potential to cause confusion with other doctrines more specific to the international arbitration regime. 35  See Abbott and Snidal, ‘Strengthening International Regulation Through Transnational New Governance’. 36  Tim Büthe and Walter Mattli, The New Global Rulers: The Privatization of Regulation in the World Economy (Princeton, 2011) 5. 37  See John Braithwaite, ‘Enforced Self-Regulation: A New Strategy for Corporate Crime Control’, 80 Mich. L. Rev. 1466, 1468 (1981–82). 38  Braithwaite, ‘Enforced Self-Regulation’ 1469. 39  John Armour and David A. Skeel, Jr., ‘Who Writes the Rules for Hostile Takeovers, and Why? The Peculiar Divergence of US and UK Takeover Regulation’, 95 Geo. L.J. 1727, 1729 (2007). 40  See Black, ‘Decentring Regulation’ 115.

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Chanticleer, the Fox, and Self-Regulation industry, illustrated most vividly by the LIBOR scandal described in the introduction to this volume. These questions must be answered by any regime that seeks to self-regulate. 6.21 Here again, governance scholars have developed a range of proposed theories and strategies for

how to fill this governance gap to make self-regulation effective and legitimate. Two important contributions provide a basis for the model of professional self-regulation, developed later in this chapter. The first is John Braithwaite’s concept of  ‘enforced self-regulation’.41 The second is Julia Black’s prescriptions for ensuring the legitimacy of private regulators.42

6.22 Braithwaite identifies the fundamental weaknesses of self-regulation—that when enforce-

ment would impose costs on those deputized to act as regulators, their incentives to regulate break down and the potential effectiveness of self-regulation also breaks down.43 To address this problem, Braithwaite proposes a model for optimizing compliance with regulatory objectives that does not simply abandon any role for traditional State power. Instead, it emphasizes a combination of self-regulation backed up by public enforcement that is sufficiently punitive to ensure both the efficacy of the self-regulatory model and internal compliance with it.44

6.23 In this model, private embedded actors are primary regulators, but government entities

monitor various stages of self-regulation, ensure compliance with minimum governmentally enacted standards, and provide back-up legal enforcement when primary enforcement breaks down.45 Braithwaite provides examples of where his enforced self-regulation model is already in place, including areas as diverse as aviation, food safety, mining, and environmental protection.46

6.24 Even if his model is designed to avoid self-regulation’s most significant weakness, Braithwaite

nevertheless also acknowledges potential problems with his model. He identifies the potential for bottlenecking in approving privately-written regulations, increased corporate costs, moral ambiguity in private drafting of regulations, judicial inflexibility in accommodating private rules, and the inability for corporate internal compliance monitoring groups to remain completely independent.47

6.25 Another essential weakness with self-regulation, explored by Black, is that private entities

can control the conduct only if their exercise of power is regarded as legitimate, meaning that

41  See Braithwaite, ‘Enforced Self-Regulation’. See also Abbott and Snidal, ‘Strengthening International Regulation Through Transnational New Governance’. 42  See Black, ‘Decentring Regulation’. An additional requisite for effective self-regulation, suggested by another commentary, is the existence of social cohesion and common normative objectives among those selfregulating. Neil Gunningham and Joseph Rees, ‘Industry Self-Regulation: An Institutional Perspective’, 19 Law & Pol’y 363, 371–2 (1997) (identifying one reason for why some industries are more successful than others is ‘the development of an effective industrial morality that brings the behavior of industry members within a normative ordering’); Klaus J. Hopt, ‘Comparative Corporate Governance: The State of the Art and International Regulation’, 59 Am. J. Comp. L. 1, 64 (2011) (suggesting that the success of the Takeovers Panel in London is related to the ‘British self-regulatory tradition’, which does not necessarily translate to other countries that do not share the tradition). 43  Braithwaite, ‘Enforced Self-Regulation’ 1469. 44  See Christine Parker, ‘Compliance Professionalism and Regulatory Community: the Australian Trade Practices Regime’, 26 J.L. & Soc’y 215, 216 (1999) (commenting on Braithwaite). 45  Braithwaite, ‘Enforced Self-Regulation’ 1471. 46  Braithwaite, ‘Enforced Self-Regulation’ 1483–90; see also Tetty Havinga, ‘Private Regulation of Food Safety by Supermarkets’, 28 Law & Pol’y 515 (2006). 47  Braithwaite, ‘Enforced Self-Regulation’ 1490–1500.

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Defining self-regulation they are perceived as acceptable and credible by those they seek to govern.48 State regulatory machinery is imbued with an inherent legitimacy that derives from its sovereign, governmental status. For a fragmented, decentralized, and largely private regulatory regime that operates in the shadow of State power, those who promulgate and enforce regulations must find other means to affirm their legitimacy. An organization or institution is considered legitimate if it establishes a ‘generalized percep- 6.26 tion or assumption that [its actions and objectives] are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions’.49 In regulatory contexts, Black explains, legitimacy essentially means being ‘perceived as having a right to govern both by those [the organization or entity] seeks to govern and those on whose behalf it purports to govern’.50 In this respect, the question of when a regulator is legitimate is not only a normative enquiry, but also an empirical enquiry.51 With ethical regulation in international arbitration, Jan Paulsson has made a similar observation about the limits of ‘self-policing’. He notes that ‘its success waxes and wanes in light of the perceptions of its bona fides’.52 As Black explains, legitimacy can be established through a range of techniques. An insti- 6.27 tution can claim legitimacy based on invocation of larger regulatory goals and values, or based on its conformity with written norms and concepts of procedural justice, fairness, transparency, consistency, and the like, which Black refers to as ‘justice-based claims’ and ‘constitutionalist-based claims’.53 Claims of legitimacy can also be based on what Black refers to as ‘functional claims’ about an organization or institution’s effectiveness in performing assigned regulatory tasks, as well as ‘democratic claims’ through reliance on processes that are representative, participatory, and deliberative.54 As discussed in greater detail later,55 international arbitration’s existing legal framework 6.28 already largely tracks the essential features of Braithwaite’s and Black’s prescriptions. International arbitration is, as Braithwaite proposes, a largely private regime backed up by government enforcement that is highly punitive, but triggered only when self-regulation breaks down. Moreover, both as a community and among its constituent parts, international arbitration self-consciously builds and guards its legitimacy through many of the means and techniques that Black analyses. The principal thesis of this book—that international arbitration should engage in express 6.29 self-regulation of its participants’ professional conduct—would map ethical regulation onto these existing features of international arbitration. The call to self-regulation, in other words, is for international arbitration to acknowledge and leverage existing self-regulatory

48  Julia Black, ‘Legitimacy and the Competition for Regulatory Share’ (23 June 2009), LSE Legal Studies Working Paper No. 14/2009, , 16. 49  Mark C. Suchman, ‘Managing Legitimacy: Strategic and Institutional Approaches’, 20 Acad. Mgmt. Rev. 571, 574 (1995). 50  Black, ‘Legitimacy and the Competition for Regulatory Share’ 9. 51  Black, ‘Legitimacy and the Competition for Regulatory Share’ 10. 52  Jan Paulsson, Foreword, in Karel Daele, Challenge and Disqualification of Arbitrators in International Arbitration (Kluwer, 2012) xx. 53  Black, ‘Legitimacy and the Competition for Regulatory Share’ 12. 54  Black, ‘Decentring Regulation’ 143–4 (explaining that multiple permutations of ‘accountability’ (i.e., within cultural norms or democratization schemes) entail normative assumptions of a narrow conceptualization of self-regulation, necessarily requiring a specific object of regulation and a regulator). 55  See paras 6.45–6.57.

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Chanticleer, the Fox, and Self-Regulation structures, extending these structures and institutions to professional regulation of various participants. 6.30 As explained in greater detail later,56 this process of express self-regulation is already well

developed with respect to arbitrators. An analogous regime is developing with respect to counsel, but it must be more expressly undertaken, also with respect to experts and thirdparty funders. Before turning to international arbitration and application of this reconceptualization of self-regulation to its participants, it is important to examine first the distinct, but related conceptualization of self-regulation traditionally applied to the professions. 2.  Self-regulation and professionalism

6.31 When it comes to the professions, the terms ‘regulation’ and ‘self-regulation’ have their own

separate baggage that is related to, but distinct from, regulation in other contexts. The term ‘self-regulation’ as applied to attorneys has traditionally been the essence of what it means to claim status as a professional.57 It is conventionally conceived of as the means of guaranteeing professional independence from political and State control. Today, this definition and the ideals it embodies are deeply contested.

6.32 Just as with self-regulation of other economic actors, sceptics of attorney self-regulation

worry about the incentives of those entrusted with their own regulation. Critics contend that professional self-regulation is a sham through which lawyers maintain an unhealthy monopoly on the provision of legal services.58 Under this view, self-regulation is what allows the legal profession to ‘stave off state regulation’ and to ‘support the status hierarchy in the profession’ by defining as unethical conduct that in which mostly non-elite lawyers engage.59

6.33 In a distinct but related vein, attorney self-regulation is also challenged as a myth because,

as a practical matter, attorneys do not actually control attorney regulation. In many countries, attorneys are expressly and heavily regulated by the political branches of government.60 In the United States, England, and many European countries, the ideal of selfregulation is often insisted on rhetorically, and sometimes trotted out to resist external regulation. For example, the International Monetary Fund had pressured Greece, Ireland,

  See paras 6.47–6.57.   Richard L. Abel, American Lawyers (1989) 37 (‘If structural functionalism had to distinguish professions by means of a single characteristic, self-regulation would be a prime candidate.’); William T. Gallagher, ‘Ideologies of Professionalism and the Politics of Self-Regulation in the California State Bar’, 22 Pepp. L. Rev. 485, 493 (1995) (‘[S]‌elf-regulation has traditionally been considered theoretically central to the professional enterprise.’); Michael J. Powell, ‘Professional Divestiture: The Cession of Responsibility for Lawyer Discipline’, 1986 Am. B. Found. Res. J. 31, 31–2 (1986) (reporting that sociologists regard self-regulation as the defining characteristic of a profession). 58 Abel, American Lawyers 23. 59 Abel, American Lawyers 157. 60  In many jurisdictions, ethical rules are promulgated through legislative enactment, even if supplemented by ancillary enforcement mechanisms. For example, in Thailand, China, Egypt, and Turkey the content attorney ethical rules are delineated by statute. In other jurisdictions, such as Chile, ethical rules are written by professional guilds, but those guilds are voluntary organizations that can exclude members, yet which have no formal regulatory power since membership is not required for law practice. See Evan A. Davis, ‘The Meaning of Professional Independence’, 103 Colum. L. Rev. 1281, 1290 (2003); Judith A. McMorrow, ‘Professional Responsibility in an Uncertain Profession: Legal Ethics in China’, 43 Akron L. Rev. 1081, 1101 (2010) (describing legislatively enacted rules governing lawyers in China, and how they override rules enacted by local professional organizations). 56 57

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Defining self-regulation and Portugal to subject their lawyers to regulation established by a regulatory body comprised mostly of non-lawyers, which would have handled discipline and complaints. In opposition, US and European bar authorities relied on notions of professional independence and self-regulation.61 Specifically they argued that an external regulator would be: . . . in clear breach of one of the core principles of the legal profession: regulation independent from the executive branch of the state—a principle recognized in Europe, the United States, and internationally. It is the cornerstone of any democratic society based on the rule of law and also necessary for the sound administration of justice.62

Despite persistent rhetoric of professional independence, and the related notion of self-regulation, as a practical matter attorneys in Europe and the United States do not solely control the mechanisms for their own regulation. In the United States and much of Europe, courts are actively engaged in the regulation of 6.34 attorneys. Some scholars contend that judicial involvement signals that self-regulation is illusory.63 Others argue that judicial supervision is consistent with a version of self-regulation,64 or a means of ensuring the most important aspect of self-regulation, namely independence from the political branches.65 Despite these objections about the role of courts, the greater challenge to the ideal of 6.35 self-regulation, even in the United States and Europe, is the virtual explosion of auxiliary regulation aimed directly at attorneys engaged in specific industries and practices.66 These regulations include national legislation, administrative regulations, judicially created rules (including liability rules), and international trade agreements. These various ancillary regulations aim at controlling activities such as money laundering, 6.36 corruption, terrorism, tax evasion, and international trade in legal services, but they de facto affect traditional notions of self-regulation by licensing and disciplinary authorities.67 For

61   Bruce A. Green, ‘Lawyers’ Professional Independence: Overrated or Undervalued?’ 46 Akron L. Rev. 599, 604 (2013). 62   Letter from Georges-Albert Dal, President, Council of Bars and Law Soc’ys of Eur., and William T. Robinson, III, President, Am. Bar Ass’n, to Christine Lagarde, Managing Director, Int’l Monetary Fund (21 Dec. 2011),

(cited in Green, ‘Lawyers’ Professional Independence’ 604 ). 63  See Fred C. Zacharias, ‘The Myth of Self-Regulation’, 93 Minn. L. Rev. 1147, 1152–3 (2009). 64  See Thomas E. Carbonneau, ‘Freedom and Governance in US Arbitration Law’, 2 Global Bus. L. Rev. 59, 85 (2011) (extolling the virtues of judicially-supervised self-regulating arbitration bodies); Benjamin H. Barton, ‘The ABA, the Rules, and Professionalism: The Mechanics of Self-Defeat and a Call for a Return to the Ethical, Moral, and Practical Approach of the Canons’, 83 N.C. L. Rev. 411, 439 (2005) (arguing the in­effectiveness of judicial oversight in curbing misconduct of the current self-regulating US legal profession); David Barnhizer, ‘Profession Deleted: Using Market and Liability Forces to Regulate the Very Ordinary Business of Law Practice for Profit’, 17 Geo. J. Legal Ethics 203, 225–6 (2004) (same). 65  See Ira Horowitz, ‘The Economic Foundations of Self-Regulation in the Professions’, in Roger D. Blair and Stephen Rubin (eds.), Regulating the Professions: A Public-Policy Symposium (1980); Paul Milgrom et al., ‘The Role of Institutions in the Revival of Trade: the Law Merchant, Private Judges, and the Champagne Fairs’, 2 Econ. & Pol. 1–23 (1990). 66  Geoffrey C. Hazard, Jr. and Susan P. Koniak, The Law and Ethics of Lawyering (1990) (cataloguing the range of statutory and common law rules that govern attorney conduct in the United States). For an overview of these developments at the international level, see Laurel S. Terry et al., ‘Transnational Legal Practice’, 42 Int’l Law. 833 (2008). 67  See David B. Wilkins, ‘Making Context Count: Regulating Lawyers After Kaye, Scholer’, 66 S. Cal. L. Rev. 1145, 1154 (1993); David B. Wilkins, ‘How Should We Determine Who Should Regulate Lawyers?’ 105 Harv. L. Rev. 799, 803 (1992).

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Chanticleer, the Fox, and Self-Regulation international arbitration, as examined in Chapter 1, two countervailing transnational regulatory interests affect national bar authorities’ power. First, international trade pressures have forced national bar authorities to open local markets to foreign attorneys, usually on the condition that they register with local bar authorities.68 Despite this development, in response to pressure to attract international arbitration business, most local bar authorities expressly exempt foreign lawyers appearing in international arbitration from such registration requirements or any other obligation to abide by local ethics rules.69 6.37 This account of attorney regulation focuses on historic, formalistic definitions of ‘regulation’

as the conventional imposition of power by entities officially authorized to regulate attorneys. But what about the new theories of regulation in other spheres examined in the first part of this chapter? Is there a corollary to attorney regulation?

6.38 Just as the term ‘regulation’ in commercial and social contexts is now understood to refer

more generally to intentional mechanisms for controlling behaviour,70 a more accurate account of attorney regulation is now expanded to include the various forces that actually control attorney behaviour. At the same time notions of command-and-control regulation were being debunked in other fields, the prevailing model of traditional attorney regulation is also on the wane. Scholars of the professions long ago noted ‘a steadily shrinking percentage of the rules and regulations governing the various aspects of legal practice’,71 hence a declining role of formal disciplinary mechanisms. To the extent that traditional attorney regulation was a form of ‘self-regulation’, this trend is not moving toward privitization. It is parallel, however, in its transition to a more flexible and utilitarian approach to how regulation acutally works.

6.39 In his seminal article about ethical regulation in the United States, David Wilkins synthe-

sized these trends, distilling them down to four categories of sources that regulate attorney conduct: • Disciplinary Controls, meaning traditional mechanisms imposed by local bar authorities working in conjunction with the judiciary; • Liability Controls, meaning malpractice claims; • Institutional Controls, meaning mechanisms that exist within the institutions attorneys operate (i.e., judicial or administrative sanctions); and • Legislative Controls, meaning statutory obligations imposed on lawyers by political branches that supplement, but are separate from, their bar-imposed ethical obligations.72 Wilkins’ reconceptualization of attorney regulation parallels new governance theories that challenge traditional streamlined command-and-control models for regulation of other economic activities. Like other theories of regulation of commercial activities, Wilkins’ work demonstrates that attorney regulation is more complex, fragmented, diffuse, and multi-faceted than the simple story about traditional forms of attorney regulation at the national level.

  See paras 1.59–1.61.   See paras 1.78–1.88. 70  Parker, ‘The Pluralization of Regulation’ 350–1 (citations omitted). 71  Wilkins, ‘Making Context Count’ 1153. 72  See Wilkins, ‘Who Should Regulate’ 806–9. 68 69

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Defining self-regulation Just as new definitions of regulation have led to debates about which regulatory regimes 6.40 work best in other fields, new understandings about attorney regulation similarly permit and require normative reconsideration of how attorneys should be regulated. What had previously been conceived of as ‘formally universal professional norms’ are given new meaning ‘as new and differently situated decision makers apply these rules to concrete cases in differing contexts’.73 Based on this fragmented reality, Wilkins argues that professional norms developed for specialized practice settings will be most effective if enforcement is contextualized, meaning if they are interpreted and applied by the institutions that are most competent and have the greatest incentives to perform the necessary regulatory functions.74 For domestic attorneys operating as advocates in national courts, this prescription suggests 6.41 that national court judges should act as primary regulators.75 As Wilkins explains, ‘[b]‌y making the enforcement process a part of an ongoing system of interactions between these knowledgeable actors and the offending lawyer, institutional controls increase the incentive for these parties to participate in the regulatory process’.76 Institutional controls also ensure informational advantages through situational monitoring and specialized institutional competence that external controls lack.77 The efficiencies of situational monitoring allow tribunals to shape enforcement within the context of adversarial incentives.78 While emphasizing what Black would call functional claims, Wilkins is also arguing that 6.42 attorney regulation should do more than efficiently enforce a static set of professional norms. Attorney regulation should also help inform an ongoing discussion about competing conceptions of the lawyer’s role.79 Such assessments should be ‘open and accessible to ensure that information about the conduct in question and the standards being applied can be reviewed, critiqued, refined, and internalized’.80 Wilkins effectively argues that attorney regulators focus on functional claims, but also employ what Black characterizes as ‘value-based’, ‘constitutionalist-based’, and ‘democratically-based’ claims of legitimacy.81 The lesson of this analysis for international arbitration, explored in greater detail in the 6.43 remainder of this chapter, is that professional regulation of attorneys is most effective if located within international arbitral proceedings, institutions, and related international organizations. National institutions lack the functionality advantages that Wilkins identifies. Conflicts among national attorney ethics have already proven problematic, and internationally promulgated rules that are enforced through national institutions risk re-fragmentation. There are, however, both normative and practical challenges in relocating regulation of attorney conduct in international arbitration to the international level and within private   Wilkins, ‘Making Context Count’ 1154.   See Wilkins, ‘Who Should Regulate’ 473 (arguing that understanding institutional incentives of those in charge of the institution is a ‘primary goal’ of determining how or who should regulate attorneys); Wilkins, ‘Who Should Regulate’ 843–4 (‘[D]‌espite their limitations, institutional controls have a number of enforcement advantages over disciplinary regulation.’). 75  While this function holds many potential benefits, in some legal systems it may not be possible as a matter of constitutional law or jurisdictional limitations for courts. While systematic comparative analysis of this issue would undoubtedly be interesting, it is beyond the scope of this volume. 76 Wilkins, ‘Who Should Regulate’ 838. 77  Wilkins, ‘Who Should Regulate’ 835. 78  Wilkins, ‘Who Should Regulate’ 835. 79  Wilkins, ‘Who Should Regulate’ 836–8. 80  Wilkins, ‘Who Should Regulate’ 884. 81  Black, ‘Legitimacy and the Competition for Regulatory Share’ 12. 73 74

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Chanticleer, the Fox, and Self-Regulation institutions and processes. The final section of this chapter takes up these challenges, after analysing self-regulation in international arbitration generally and with respect to international arbitrators.

B.  Self-regulation in international arbitration 6.44 The main purpose of this book, and specifically this chapter, is to encourage a more sys-

tematic approach to professional self-regulation within international arbitration as a means to increase its legitimacy, reduce disruptions, and stave off potential external regulation. Although often framed as a new innovation, in reality, professional self-regulation in international arbitration is already a reality in various forms. At the most fundamental level, international arbitration is itself an example of a self-regulating dispute resolution regime, as examined in Section 1. With regard to international arbitrators, a robust form of self-regulation, analysed in Section 2, has developed organically and in response to perceived needs. A similar process, already underway with attorneys, is examined in Section 3. The chapter concludes with some thoughts about developments toward a selfregulatory regime for arbitrators and counsel being extended to experts and eventually third-party funders. 1.  International arbitration as a self-regulatory regime

6.45 International arbitration is often characterized as a ‘ticket’ to admission to international

trade. According to some commentators, sacrifice of national regulatory objectives is the price of that ticket.82 Under this view, international arbitration is one of the essential reasons why States have lost regulatory control over international economic activities.83 Without dismissing the underlying concerns, that analysis arguably inverts, at least partially, the cause-and-effect relationship between the State loss of regulatory control and the rise of international arbitration.84

6.46 Analysis of the effect of international arbitration on State regulation of global activities must

begin with a clear understanding of what international arbitration displaces. In domestic contexts, national courts are a primary mechanism for enforcing State regulatory power.85 While this function is most prevalent in the United States, with its tradition of private enforcement through litigation, other jurisdictions are increasingly relying on judicial mechanisms for regulatory enforcement.86 With transnational activities, however, the viability of this

82  For a classic analysis of the dilution of national mandatory law in international arbitration, see Philip J. McConnaughay, ‘The Risks and Virtues of Lawlessness: A “Second Look” at International Commercial Arbitration’, 93 Nw. U. L. Rev. 453, 461 (1999). 83  See Gunther Teubner, ‘Breaking Frames: The Global Interplay of Legal and Social Systems’, 45 Am. J. Comp. L. 149 (1997) (arguing that transnational commercial actors and multinational corporations challenge the supremacy of state-based legal systems for pre-eminence in the production of norms). See also Alec Stone Sweet, ‘The New Lex Mercatoria and Transnational Governance’, 13:5 J. Eur. Pub. Pol’y 627 (2006). For an analysis of these developments and their relation to international private law, see Wai, ‘Transnational Liftoff and Juridical Touchdown’. 84  Antipoetic systems such as international arbitration can allow ‘those actors with the resources, scale, and expertise to monitor a complex regulatory terrain . . . will be the most able to advance their interests’. See Wai, ‘Transnational Liftoff and Juridical Touchdown’ 264. 85  Martin Shapiro, Courts: A Comparative and Political Analysis (1986) 25 (analysing adjudication as a form of regulation or ‘social control’). 86  Strong, ‘Regulatory Litigation in the European Union’ 901.

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Self-regulation in international arbitration function breaks down considerably.87 This breakdown is in part what inspired global governance scholars, described earlier, to analyse how regulation of global commercial activities systematically exceeds the grasp of States. Like other forms of national regulation dispute resolution similarly loses its potency when the 6.47 target is cross-border conduct. National court control over transnational disputes, including disputes aimed at enforcing important national regulations, is fraught with ambiguities and limitations. Basic matters of jurisdiction, choice-of-law, cross-border evidence gathering, and— most crucially—enforcement of resulting judgments present unique challenges when disputes involve transnational elements.88 Gary Born has dubbed these the ‘peculiar uncertainties’ of national litigation of international disputes.89 The cumulative effect of these ‘peculiar uncertainties’ is that, although one State might assert 6.48 that a particular national law is mandatory, that law is only actually binding if the State that imposes it can also effectively enforce it. As a practical matter, an ostensibly mandatory national law can be avoided, can lose its mandatory quality, in a particular case if another State’s court adjudicates the case and applies its own law, or refuses to enforce the enacting State’s judgment.90 International arbitration must be evaluated against the background of this regulatory uncertainty, not against the false assumption of a fully effective regulatory framework that simply does not exist at the transnational level. The effectiveness of international arbitration in contrast to national courts explains why, for many categories of claims, it has emerged as the primary mechanism for resolving transnational disputes.91 International arbitration has become the primary mechanism for resolving transnational dis- 6.49 putes precisely because it ensures an enforceability for awards that might otherwise be elusive with national court judgments.92 International arbitration avoids the ‘peculiar uncertainties’

87   Christopher A. Whytock, ‘Domestic Courts and Global Governance’, 84 Tul. L. Rev. 67, 71 (2009) (arguing that domestic courts are ‘pervasively involved in regulating transnational activities’ but analysing how that role is limited to allocating governance authority); Christopher A. Whytock, ‘Transnational Judicial Governance’, 2 St. John’s J. Int’l & Comp. L. 55 (2012). 88   Gary Born, International Commercial Arbitration (Kluwer, 2014) 66 (hereafter 'Born'). 89   Born 66. National courts continue to perform important global governance functions for those categories of cases in which parties are unable or unlikely to agree to arbitration, such as tort cases and public international law cases. See Whytock, ‘Domestic Courts’ 94–6. 90  See John R. Allison, ‘Arbitration Agreements and Antitrust Claims: The Need for Enhanced Accommodations of Conflicting Public Policies’, 64 N.C. L. Rev. 219, 224–5 (1986) (illustrating national challenges to other national awards in a historical sense). This argument has also been advanced by some commentators, who point out that expert arbitrators may be substantively superior to lay juries. See Dora Marta Gruner, Note, ‘Accounting for the Public Interest in International Arbitration: The Need for Procedural and Structural Reform’, 41 Colum. J. Transnat’l L. 923, 944 (2003). Still, there remain detractors who contend that arbitration downplays public interests because ‘[t]‌he goal of arbitrators is to resolve the dispute presented in a manner responsive to the interests of the parties. Unlike judges, arbitrators need not, and generally should not, consider broader public interests as well’. Hannah L. Buxbaum, ‘The Private Attorney General in a Global Age: Public Interests in Private International Antitrust Litigation’, 26 Yale J. Int’l L. 219, 245 (2001). But see Philip J. McConnaughay, ‘The Risks and Virtues of Lawlessness: A “Second Look” at International Commercial Arbitration’, 93 Nw. U. L. Rev. 453, 456 (1999) (arguing that international arbitral awards ‘are far less likely than public judicial decisions to effectuate the purposes of the mandatory laws’). 91  Born 66. National courts continue to perform important global governance functions for those categories of cases in which parties are unable or unlikely to agree to arbitration, such as tort cases and public international law cases. See Whytock, ‘Domestic Courts’ 94–6. 92  Some scholars have attempted, based on empirical analysis, to challenge claims concerning the primacy of international arbitration in international commercial disputes. See Theodore Eisenberg and Geoffrey P. Miller,

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Chanticleer, the Fox, and Self-Regulation of transnational adjudication in national courts by replacing State-produced rules and procedures with alternatives that are primarily developed and implemented privately and at the international level.93 In international arbitration, the agreement between the parties generally determines the venue, the applicable arbitral and procedural rules, the applicable substantive law, and the identity of the arbitrators themselves. A range of private and nongovernmental organizations promulgate rules and guidelines that facilitate these party agreements and provide gap fillers. Most prominent among these private entities94 are arbitral institutions, which promulgate arbitral rules and administer arbitration cases. Through their rules and under their auspices, arbitral tribunals, appointed through agreement among the parties, generate binding awards. 6.50 Arbitral awards are not endowed with any formal precedential effect on subsequent cases or

other arbitral tribunals. They have nevertheless incrementally built up into a body of informal international arbitration precedent, in both investment arbitration95 and, to a lesser

‘The Flight from Arbitration: An Empirical Study of Ex Ante Arbitration Clauses in the Contracts of Publicly Held Companies’, 56 Depaul L. Rev. 335, 367 (2007) (arguing that there is a ‘paucity of arbitration clauses, even in international contracts’). Subsequent analysis has largely discredited the validity of these studies. See Christopher R. Drahozal and Stephen J. Ware, ‘Why Do Businesses Use (or Not Use) Arbitration Clauses?’ 25 Ohio St. J. on Disp. Resol. 433, 463 (2010) (explaining that Eisenberg and Miller erroneously ‘focus on types of contracts that are unlikely to include arbitration clauses’ and ‘they either do not consider, or pay little heed to, the types of contracts that the arbitration literature commonly identifies as likely to include arbitration clauses. As a result, their study likely significantly understates the use of arbitration clauses in [international] contracts between sophisticated parties.’). 93   For example, when service of process and gathering evidence implicate exchanges among the nationals and courts of different States, national differences, and sovereign sensitivities, such service can only be accomplished through treaties that most lawyers consider overly ‘time-consuming and unnecessarily complex . . . to accomplish what is routine in domestic litigation’. Prego Signor Postino, et al., ‘Using The Mail to Avoid the Hague Service Convention’s Central Authorities’, 12 Or. Rev. Int’l L. 283, 286 (2010). Some US attorneys, unaware of these sensitivities, have even been arrested or provoked diplomatic protests in foreign jurisdictions. See, e.g., US Dept. of State, Service of Legal Documents Abroad, (‘It may be prudent to consult local foreign counsel early in the process on this point. American process servers and other agents may not be authorized by the laws of the foreign country to effect service abroad, and such action could result in their arrest and/or deportation.’). This unnecessary complexity becomes decidedly more streamlined and simple when predicated on privately agreed-upon arbitral procedures and a private process that does not implicate sovereign sensitivities. 94  There are a few arbitral institutions that are not private, such as the Permanent Court of Arbitration (PCA), which is an inter-governmental agency, and International Centre for Settlement of Investment Disputes (ICSID), which is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. See Steven L. Smith and Ivana J. Cingel, § 19:10, ‘Permanent Court of Arbitration’, in Bette J. Roth, Randall W. Wulff, and Charles A. Cooper, 1 Alternative Dispute Resolution Practice Guide (2012); ICSID: ‘About ICSID’ . 95  See Justin D’Agostino et al., ‘A Discussion on the Use of Precedents in International Investment Arbitration and its Consequences. Does the Evolving Practice of Relying on Previous Investment Arbitration Awards Represent the Birth of a Customary International Law on Investment?’, Herbert Smith (2011) (draft) (arguing the extent of precedent in investment arbitration); Matthew Weiniger, Editorial, ‘Special Issue on Precedent in Investment Arbitration’, 3 Transnat’l Disp. Mgmt. (2008) (same); Tai-Heng Cheng, ‘Precedent and Control in Investment Treaty Arbitration’, 30 Fordham Int’l L.J. 1014, 1016 (2007) (‘[A]‌lthough arbitrators in investment treaty arbitration are not formally bound by precedent in the same manner as common-law judges, there is an informal, but powerful, system of precedent that constrains arbitrators to account for prior published awards and to stabilize international investment law.’). But see Irene M. Ten Cate, ‘The Costs of Consistency: Precedent in Investment Treaty Arbitration’, 51 Colum. J. Transnat’l L. 418 (2013) (arguing that investment treaty arbitration lacks precedent).

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Self-regulation in international arbitration extent, in international commercial arbitration.96 Cumulatively, these awards have become an important source of guidance for subsequent parties and tribunals.97 Because they are the products of private sources, however, they are not pronounced or promulgated like public laws. They are, instead, disseminated through private channels. Although global and diffuse, in the past several years international arbitration has become remark- 6.51 ably effective at exchanging information and vetting new developments among various participants.98 An extraordinary number of conferences, professional publications, professional trade organizations, listserves, blog posts, LLM programmes, moot court competitions, lunch clubs, special interest groups, young practitioner groups, and networking events facilitate these exchanges. In addition to facilitating dissemination and discussion of developments in the field, these processes also contribute to a socialization process within the international arbitration community.99 Similar information-sharing and socialization in other substantive areas, such as antitrust, secu- 6.52 rities, and corruption, have been characterized as creating international networks that promote transnational regulatory governance.100 Even more deliberatively, international arbitration has claimed for itself various regulatory powers that were historically regarded as the exclusive province of States, including enforcement at the transnational level of securities, antitrust, and anticorruption laws. Perhaps the best illustration of how international arbitration evolved into a mechanism for global governance is with respect to corruption. Although contracts procured through corruption were historically regarded as beyond the jurisdiction of arbitral tribunals,101 such disputes are now generally regarded as subject to arbitral jurisdiction.102 Today, the exact nature and perimeters of arbitral tribunals’ regulatory function regarding 6.53 allegations of corruption is being vigorously debated.103 Questions range from fundamental

96   See Catherine A. Rogers, ‘The Vocation of the International Arbitrator’, 20 Am. U. Int’l L. Rev. 957, 999–1000 (2005); Cindy G. Buys, ‘The Tensions Between Confidentiality and Transparency in International Arbitration’, 14 Am. Rev. Int’l Arb. 121, 123 n. 7 (2003) (‘Although arbitral awards have no precedential value, the reasoning of the arbitrators may be persuasive to other arbitrators confronting the same or a similar issue.’); Gabrielle Kaufmann-Kohler, ‘Globalization of Arbitral Procedure’, 36 Vand. J. Transnat’l L. 1313, 1323 (2003) (discussing how the IBA Rules primarily ‘restate and generalize’ established international arbitration practices). 97   See generally, Gilbert Guillaume, ‘The Use of Precedent by International Judges and Arbitrators’, 2 J. Int’l Disp. Settlement 5 (2011); Kenneth Michael Curtin, ‘Redefining Public Policy in International Arbitration of Mandatory National Laws’, 64 Def. Couns. J. 271, 279 (1997) (‘Publication of arbitral awards . . . is becoming more common, thus alleviating the difficulties associated with a lack of precedent.’); Klaus Peter Berger, ‘International Arbitration Practice and the Unidroit Principles of International Commercial Contracts’, 46 Am. J. Comp. L. 129, 149 (1998) (stating that ‘arbitral awards more and more assume a genuine precedential value within the international arbitration process’). 98  For a detailed analysis of the development of this information, see Catherine A. Rogers, ‘Transparency in International Commercial Arbitration’, 54 Kansas L. Rev. 1301 (2006). 99  See Yves Dezalay and Bryant Garth, Dealing in Virtue: International Arbitration and the Construction of a Transnational Legal Order (University of Chicago Press, 1996) 18–29, 278 (noting socialization of lawyers into the elite arbitration network and adoption of eastern arbitration norms). 100  See Anne Marie Slaughter, A New World Order (Princeton University Press, 2004) 20–21. 101  In the first case that portended this rule, Mr X, Buenos Aires v Company A, Award, ICC Award No. 1110, at para. 24 (1963), 10 Arb. Int’l 282, 293 (1994), the tribunal refused to adjudicate the case in which a British company agreed to pay bribes to an Argentinean intermediary. The tribunal concluded that it had no arbitral jurisdiction. See also Mr X, Buenos Aires, at para. 16 (noting that ‘contracts which seriously violate bonosmores . . .  cannot be sanctioned by courts or arbitrators’). 102  Later arbitral tribunals have affirmed that they had jurisdiction over disputes involving contracts procured through corruption. See Born’ 1013–15. 103  Kenneth D. Beale and Paolo Esposito, ‘Emergent International Attitudes Towards Bribery, Corruption and Money Laundering’, 75 Arb. 360 (2009); Aloysius Llamzon, ‘The Control of Corruption through

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Chanticleer, the Fox, and Self-Regulation issues about the extent and limits of arbitral tribunals’ obligations to more technical issues about the burden of proof applicable to establishing corruption as a legal defence.104 The very existence of that debate, however, demonstrates recognition of the potentially important regulatory function for international arbitrators with respect to commercial and investment activities involving corruption.105 6.54 Beyond issues of corruption, international arbitral tribunals also routinely adjudicate claims

involving transnational applications of mandatory law, perhaps even more often and more effectively than domestic national courts for certain types of disputes.106 In contrast to the ‘peculiar uncertainties’ of transnational litigation, anecdotal evidence suggests that international arbitration is doing a reasonably robust job of enforcing mandatory law in individual cases.107 Far from completely undermining the public concerns embodied in mandatory rules, international arbitration is capable of ensuring, often does ensure, and perhaps even strengthens, their vitality in cross-border contexts.

6.55 Just as Braithwaite proposes in his model of enforced self-regulation, described earlier, inter-

national arbitration’s success is at least partially attributable to the fact that States provide an essential, though limited, control function. Virtually every State active in international commerce is a signatory to the New York Convention, the Panama Convention, or both.108 Consistent with the Conventions, national judicial involvement in international arbitration cases is minimized, but it comes into play at key junctures, most notably annulment and enforcement of agreements and awards. States adopt national arbitration laws, which can undergird arbitral procedures, fill gaps in the absence of party agreement, and provide grounds for annulling locally made awards. National legislative and judicial functions are in the background of the primary and private ordering of the regime, but provide a last resort when things go wrong in the private ordering.109

International Investment Arbitration: Potential and Limitations’, 102 Am. Soc’y Int’l L. Proc. 208, 208 (2008); Hilmar Raeschke-Kessler and Dorothee Gottwald, ‘Corruption in Foreign Investment—Contracts and Dispute Settlement between Investors, States, and Agents’, 9 J. World Inv. & Trade 1, 5 (2008); Matthias Scherer, ‘Circumstantial Evidence in Corruption Cases before International Arbitration Tribunals’, 5 Int’l Arb. L. Rev. 29, 29 (2002). 104  Abdulhay Sayed, Corruption in International Trade and Commercial Arbitration (Kluwer Law, 2004); Stephan Wilske and Todd J. Fox, ‘Corruption in International Arbitration and Problems with Standard of Proof: Baseless Allegations or Prima Facie Evidence?’ in Stefan Michael Kröll and others (eds.), International Arbitration and International Commercial Law: Synergy, Convergence and Evolution (Kluwer, 2011) 489. 105  The remaining questions about the role of international arbitrators with respect to corruption focus on their function should interact with existing standards and with other potential centers for regulation. These issues are explored in greater detail in Chapter 9. 106  See Buxbaum, ‘The Private Attorney General in a Global Age’ 262 (noting that nearly all of antitrust enforcement is through private litigation and arbitration). 107  For example, in its amicus brief urging the Supreme Court to permit the arbitration of antitrust claims in Mitsubishi v Soler, the ICC provided numerous examples of cases administered under the auspices of the ICC in which various national competition laws were ‘adeptly handled’ and the public policy interests of the relevant countries were taken into account. Amicus Curie Brief of International Chamber of Commerce, 4–5, Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc., 473 US 614 (1985) (Nos. 83–1569, 83–1733). 108  Currently, 149 countries are signatories to the New York Convention, and 19 countries are signatories to the Panama Convention. See New York Arbitration Convention, ; Organization of American States, . 109  See W. Michael Reisman, Systems of Control in International Adjudication and Arbitration: Breakdown and Repair (1992) 113 (analysing how international arbitration intentionally minimizes the role of national courts to avoid ‘transfer [of ] the real decision power from the arbitration tribunal . . . to a national court’).

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Self-regulation in international arbitration The fact that most awards are voluntarily complied with110 means that even if national courts 6.56 are authorized to review awards in annulment or recognition and enforcement proceedings, they rarely actually undertake that review. When they do, it is even more rare that they would actually annul or refuse to enforce an arbitral award. Despite the low probabilities in absolute terms, the risk that national courts will annul or refuse enforcement of an award is like the north point on a compass that keeps arbitral proceedings on course. Arbitrators have an affirmative duty to render an award that is likely to be enforced,111 and parties often reference the risk of annulment or non-enforcement when arguing in favour of procedural opportunities or applicability of mandatory law. Arbitration’s self-regulatory function, in other words, operates in the shadow of national courts’ control function. The result of these arrangements is a ‘transnational, hybrid institutional constellation in 6.57 which states cooperate to put the authority of their domestic courts behind private dispute resolution bodies’.112 International arbitration is a complex, fragmented, diffuse, and multifaceted regime. States are willing to defer to it because they cannot replicate the expertise of international arbitration specialists, who are best-situated and suited to develop and operationalize applicable procedural rules and standards that can produce enforceable outcomes. Although not often regarded as such by arbitration practitioners themselves, the international arbitration regime is an example of the model of global governance described earlier in Section A.1. The remainder of this chapter argues that the professional regulation of participants in international arbitration has been, and should be, intentionally modelled to fit the self-regulatory structure of this regime. 2.  Arbitrator regulation as a model of professional self-regulation As examined in Chapter 2, international arbitrators are largely exempt from traditional forms 6.58 of national regulation that bind various other professions, such as barbers, taxidermists and even lawyers. Until recently they were also largely exempt from any regulation at the international level. Instead, international arbitrators’ conduct was subject only to unchecked selfmonitoring, and a hodge-podge of anaemic and disjunctive controls.113 Chapter 2 examined how this vacuum has been filled with a range of new sources, but also how expectations on and challenges for arbitrators have expanded in recent years. Drawing on those descriptions in Chapter 2, this Part analyses how the sources and procedures that control arbitrator 110  See Paul Friedland and Stavros Brekoulakis, 2012 International Arbitration Survey: Currrent and Preferred Practices in the Arbitral Process (2 Nov. 2013), . 111  Born 2044 (‘One of the arbitrator’s most significant obligations is to render an award that is enforceable. This duty is frequently expressed, as an objective, in institutional rules.’); Julian D. M. Lew, ‘The Law Applicable to the Form and Substance of the Arbitration Clause’, in Albert Jan van den Berg (ed.), Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention (9 ICCA Cong. Ser, 1998, Kluwer, 1999) 114, 118 (‘The ultimate purpose of an arbitration tribunal is to render an enforceable award.’). But see Christopher Boog and Schellenberg Wittmer, ‘The Lazy Myth of the Arbitral Tribunal’s Duty to Render an Enforceable Award’, Kluwer Arb. Blog, 28 Jan. 2013, (arguing that arbitrators do not have an affirmative duty to render enforceable awards). 112  Thomas Hale, ‘The Rule of Law in the Global Economy: Explaining Intergovernmental Backing for Private Commercial Tribunals’, APSA Annual Meeting Paper (2013), . 113  Huang Yanming, ‘The Ethics of Arbitrators in CIETAC Arbitration’, 12(2) J. Int’l Arb. 5, 6 (1995) (advancing a view common at the time that ‘an arbitrator’s [personal] “self-discipline” and reputation are sufficient to safeguard the integrity of the process’).

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Chanticleer, the Fox, and Self-Regulation conduct have evolved into an effective and legitimate—if still-evolving—self-regulatory regime. Arbitral institutions and organizations operate as primary regulators. These entities have establishd their regulatory role through demonstrated expertise and proximity, as well as constructive self-interest in safeguarding the effectiveness of arbitral processes. 6.59 Focusing on arbitrators’ obligations of independence and impartiality, Section a of this Part

examines how the various constituent substantive parts of those obligations—a duty to investigate, a duty to disclose, and standards for disqualification—were primarily developed and refined by private international institutions and organizations, not national or governmental regulators. Section b examines enforcement of these obligations primarily within international arbitration processes and institutions.

a.  The content of arbitrators’ impartiality obligations 6.60 Arbitrators’ skill and expertise may entice parties to entrust their disputes to international arbitration, but it is their neutrality that largely accounts for confidence in their final decisions. International arbitrators personify the promise of neutral decision-making in international arbitration.114 Their ethical obligations are the expression of that promise. As examined in Chapter 1, international arbitrators were historically a small, intimate group that did not seem to need any formal professional regulation. With increased complexity, size, and diversity of cases, as well as ever greater demands for transparency and predictability, arbitrators’ personal sense of rectitude and related informal social controls are now insufficient.115 That determination, and regulatory responses to it, were made primarily by private arbitral institutions and organizations. i.  The duty to disclose 6.61 As a practical matter, the selection and appointment process is the primary means through

which arbitrators are regulated. This process begins with a duty by prospective arbitrators to disclose information about potential conflicts of interest. The development and refinement of this duty over time is one of the best examples of how regulatory competence is allocated in international arbitration.

6.62 National law has been notably vague, and occasionally even silent, about the existence

and perimeters of a duty of disclosure for arbitrators. Perhaps most strikingly, the English Arbitration Act of 1996 deliberately omits any express affirmative duty of disclosure116 and English courts have not imposed such an obligation.117 English legislation and case law may be an outlier since national legislation and case law from jurisdictions acknowledge the

114  See Catherine A. Rogers, ‘Regulating International Arbitrators: A Functional Approach to Developing Standards of Conduct’, 41 Stan. J. Int’l L. 53, 86–7 (2005). 115  See paras 1.12–1.23. 116  Robert Merkin, Arbitration Law, at para. 10.23 (1991, updated June 2013). 117  A v B and X [2011] EWHC 2345, at para. 88 (QB (Comm)) (‘Whilst arbitrators may indeed make wider disclosure [than required by the rules of the LCIA] out of caution, they are under no obligation to do so, let alone under an obligation breach of which could entitle the aggrieved party to say there was a serious irregularity, for the purposes of section 68 of the Arbitration Act, notwithstanding that there was not in fact any arguable case of apparent bias.’); AT&T Corp. v Saudi Cable Co. [1999] All ER(D) 1100 (Comm), appeal dismissed in [2000] EWCA (Civ) 154 (Eng.) (no duty of disclosure under Arbitration Act or common law). See also David Sutton, et al., Russell on Arbitration, 23rd edn., (2007) at para. 4-128 (early disclosure of prior interests that may give rise to impartiality is advisable but not expressly required by statute); Gillian Eastwood, ‘A Real Danger of Confusion? The English Law Relating to Bias in Arbitrators’, 17 Arb. Int’l 287, 297 (2001).

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Self-regulation in international arbitration existence of such a duty. Even those States that impose such a duty, however, do not effectively clarify the perimeters of the duty. While some national laws still lack disclosure obligations, all international arbitration 6.63 rules impose such a duty.118 These obligations evolved within arbitral institutions, even among those institutions that are not private.119 This analysis illustrates two important features of the duty to disclose. First, arbitral institutions preceded States in imposing such a duty. Second, when national authorities adopt a duty to disclose, they draw inspiration from the privately implemented obligation. For example, when the US Supreme Court first pronounced the existence of such a duty under US law in Commonwealth Coatings Corp. v Continential Cas. Co.,120 it relied on the existence of a duty to disclose under American Arbitration Association (AAA) arbitral rules as ‘highly significant’, even if ‘not controlling’.121 In addition to creating arbitrator disclosure obligations, arbitral institutions have also 6.64 significantly and voluntarily refined the content of those obligations over the years. For example, the earliest version of disclosure obligations in the International Chamber of Commerce (ICC) Rules required only that a prospective arbitrator disclose information that the arbitrator believed from the arbitrator’s own subjective perspective called the arbitrator’s independence into question.122 Later versions of the ICC Rules reduced this almost absolute personal discretion by requiring that arbitrators 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’.123 Even more recently, the ICC disclosure standard has been revised again to require disclosure of ‘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, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality’.124

118   See Born 1951. For example, the LCIA Rules require disclosure of any ‘circumstances known to him likely to give rise to any justified doubts as to his impartiality or independence’. LCIA Arbitration Rules, art. 5(3) (1998); ICDR International Arbitration Rules, art. 7(1) (2010). See also WIPO Arbitration Rules, art. 22(b) (2002); DIS Arbitration Rules, §16(1) (1998). 119  For example, in 1976, the UNCITRAL Arbitration Rules imposed a duty to disclose. See art. 9 (1976). Moreover, although neither the ICSID Convention nor the original ICSID Arbitral Rules of 1968 contained a duty to disclose, the 1984 version of the ICSID Rules introduced such a duty and the 2006 Arbitral Rules clarified and expanded the duty. See Daele, Challenge and Disqualification of Arbitrators in International Arbitration 3. Specifically, the new rule requires disclosure of ‘past and present professional, business and other relationships (if any) with the parties’ and ‘any other circumstance that might cause [the arbitrators’] reliability for independent judgment to be questioned by a party’. See ICSID Arbitration Rules, R. 6(2) (2006). As revisions to the rules, these changes were introduced by ICSID through its delegated rule-making powers, as opposed to a multinational treaty or other formal governmental decision. 120  393 U.S. 145, 149 (1968). 121  Commonwealth Coatings, 393 U.S., 149. 122  W. Lawrence Craig et al., International Chamber of Commerce Arbitration, 3rd edn.,(2000) § 13.03, 214 and n. 26. 123  See Rules of Arbitration of the International Chamber of Commerce, art. 7, § 2 (1998), [1998 ICC Rules]; see also 1998 ICC Rules, art. 7, § 3 (requiring disclosure of same information discovered later in proceedings). 124  ICC Arbitration Rules, art. 11(2) (2012) [ICC Rules].

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Chanticleer, the Fox, and Self-Regulation 6.65 These newer standards, which are often referred to as incorporating a ‘subjective’ standard but

this time from the parties’ (not arbitrators’) perspective,125 are intended to require broader disclosure.126

6.66 Some institutional rules also supplement disclosure obligations with a statement of independence

that includes additional specificity about the nature of disclosures. For example, in response to continued complaints about delays in arbitral proceedings and the timeliness of awards, in August 2009 the ICC expanded its more general Statement of Independence to a ‘Statement of Acceptance, Availability and Independence’. This new Statement compels disclosure of specifics about prospective arbitrators’ caseloads, not ‘[g]‌eneral descriptions, such as “many” or “several” [matters]’. To that end, prospective arbitrators must list their ‘currently pending’ cases, including cases as counsel, coarbitrator, and sole or presiding arbitrator. They must also confirm their ability to devote necessary time to the arbitration and to conduct the process ‘diligently, efficiently and in accordance with the time limits in the Rules’.127 In addition to disclosure obligations during the appointment process, new revisions to the ICC Rules also require arbitrators to provide the parties and the ICC Secretariat with an expected date when the award will be rendered after the close of proceedings.128

6.67 This newly expanded disclosure obligation was prompted by the ICC’s need to safeguard its own

legitimacy among parties and to compete effectively with other institutions. The response, however, also demonstrates the power politics that can affect private implementation of new regulatory policies.129 The new ICC disclosure requirement drew swift and vigorous backlash from some arbitrators. Among other things, on the substance, they argued that counting cases was not an accurate means of evaluating how busy an arbitrator is or how efficiently the arbitrator can resolve a case. Some arbitrators apparently even threatened a lawsuit, alleging that the proposed rule violated EU Competition Law and data protection rules. In halls of arbitration conferences, occasional mumblings can still be heard to the effect that the ICC has become outright hostile to arbitrators. These objections may have developed more traction were it not for support for the ICC reforms reportedly offered by law firms and corporate parties. The ICC may have been risking perception of legitimacy among arbitrators, but that seems to have gained legitimacy among other critical groups, users, and counsel.130 125   Reference to the ‘eyes of the parties’ is routinely interpreted as imposing a subjective standard for arbitrator disclosure under the ICC Rules. See Yves Derains and Eric A. Schwartz, Guide to the ICC Rules of Arbitration 2nd edn. (Kluwer, 2005) 134–5; Gary Born, ‘The Danish Institute of Arbitration Updates Its Arbitral Rules’, Kluwer Arb. Blog, 28 May 2013, (discussing subjective and objective standards of disclosure); Claudia T. Salomon et al., ‘Arbitrator’s Disclosure Standards: The Uncertainty Continues’, 63-OCT Disp. Resol. J. 76, 79 (2008); John M. Townsend, ‘Clash and Convergence on Ethical Issues in International Arbitration’, 36 U. Miami Inter-Am. L. Rev. 1, 18 (2004). The terminology of ‘subjective intent’ is misleading, a topic taken up in greater detail in Chapter 8. 126  A better interpretation of what is meant by the ‘eyes of the parties’ reference in the ICC Rules is that the assessment of a duty to disclose is not limited to what would be ‘reasonable’ for a generic objective observer, but rather what would be reasonable from an observer with the same characteristics, background, and experience of the parties. In other areas of law, such as tort and criminal law, this adaptation of the objective standard is referred to as a ‘modified objective standard’. See e.g., Joseph M. Perillo, ‘The Origins of the Objective Theory of Contract Formation and Interpretation’, 69 Fordham L. Rev. 427, 451 (2000); Vaughan v Menlove (1837), 3 Bing. N.C. 467, 132 E.R. 490 (Can.) (applying modified objective test in negligence setting). 127  See Erika Myrill, ‘Datebook Handy? New ICC Form Forces Arbitrators to Certify their Availability Before Proceedings Begin (Web)’ . 128  ICC Rules, arts. 27 and 33. 129  See generally, Büthe and Mattli, The New Global Rulers. 130  The backlash from arbitrators in response to ICC reforms suggests that it might be difficult for institutions with less institutional fortitude, history, and influence than the ICC to adopt such measures, at least unless and until such disclosures become a more universally accepted norm for disclosure.

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Self-regulation in international arbitration Outside of mainstream European arbitral institutions, arbitral institutions have a slightly 6.68 different approach to arbitrator regulation. Several newer regional institutions have introduced specific codes of ethics for international arbitrators.131 For these newer institutions, which do not enjoy the established legitimacy of older and better known competitors, codes of conduct for arbitrators can be seen as a signal that the institution was ready to assume an active regulatory role in assuring proper arbitrator conduct.132 While arbitral instititions have been at the forefront of arbitrator disclosure obligations, they 6.69 contain mostly vague standards, such as ‘independence’, ‘impartiality’, ‘in the eyes of the parties’, and ‘justifiable doubts’. The problem with these standards is that, they are qualitative standards. As such, they effectively leave arbitrators with tremendous discretion about what to disclose and provide little guidance for how to interpret and apply the standard in specific situations. When arbitrators are asked to decide how to apply qualitative standards to these specific fac- 6.70 tual settings, even acting in the utmost good faith, there can be disagreement about whether disclosure was warranted. In the words of one commentator, even under the supposedly more exacting ICC standard, ‘[a]‌rbitrators are . . .  required “to stretch their mind” as to how certain circumstances might be perceived by the parties’.133 The problem with this mind-stretching exercise is that it occurs precisely at the moment 6.71 when a prospective arbitrator must also stretch their minds to put aside their own potential financial interests since the decision to make a disclosure can lead to challenge and disqualification. In other words, the decision to disclose a conflict-within-a-conflict. While intuition alone might suggest that this conflict-within-a-conflict is a problem, today we also have psychological research that verifies how a self-interested conflict can blur or ‘bias’ the decision to disclose.134 Consider, for example, the situation in which a prospective arbitrator is a member of a law firm 6.72 that is providing legal advice to one of the parties on an unrelated matter with which the arbitrator has no personal involvement.135 Such contacts are today generally, but not universally, regarded as necessary to disclose. Fifteen or 20 years ago, most international arbitrators might have considered this situation unnecessary to disclose. Given historical changes and current room for disagreement, it is easy to imagine how a well-intentioned arbitrator reading the

131  See,e.g., Milan Chamber of Commerce, International Arbitration Rules: Code of Ethics of Arbitrators (2010), ; Singapore International Arbitration Centre, Code of Practice: Code of Ethics for an Arbitrator (2009), . 132   Black, ‘Legitimacy and the Competition for Regulatory Share’ 15–6. 133  Daele, Challenge and Disqualification of Arbitrators in International Arbitration 910. 134   Social scientists have identified a ‘self-serving bias’ that causes a decision-maker to ‘arrive at judgments of what is fair or right that are biased in the direction of their own self-interests’. Linda Babcock and George Loewenstein, ‘Explaining Bargaining Impasse: The Role of Self-Serving Biases’, 11 J Econ. Perspectives 109, 111 (1997). In addition, as some commentators describe: ‘[D]‌ecision makers are psychologically motivated to maintain a stable view of a self that is moral, competent, and deserving, and thus, immune from ethical challenges . . . [T]his view is a barrier to recognizing and addressing conflicts of interest. So, ironically, decision makers’ persistent view of their own ethicality leads to subethical decisions.’ Dolly Chugh et al., ‘Bounded Ethicality as a Psychological Barrier to Recognizing Conflicts of Interest’, in Don A. Moore et al. (eds.), Conflicts of Interest: Challenges and Solutions in Business, Law, Medicine, and Public Policy (Cambridge, 2005) 104, 109. 135   IBA Guidelines on Conflicts, 2.3.3.

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Chanticleer, the Fox, and Self-Regulation ICC’s standard could reasonably conclude that, since the arbitrator does not have any direct involvement in or knowledge about the representation, it could not affect his or her independent judgment and no party could believe it would.136 In other words, the vague qualitiative standard leaves arbitrators with significant discretion in interpreting how that standard applies. 6.73 This is where the International Bar Association (IBA) and its Guidelines on Conflicts of

Interest in International Arbitration (IBA Guidelines on Conflicts) make an important difference. The drafters of the IBA Guidelines on Conflicts converted vague qualitative standards into more precise quantitative, objective, and fact-based categories of information. These categories are organized in the familiar ‘red’, ‘orange’, and ‘green’ lists, which allow for relatively easy reference and application. These categories were developed relying on the collective experience of the drafters, systematic study of national and international precedents, and an extensive public consultation process.137

6.74 By shifting from qualitative standards to quantitative, fact-based catetories, the IBA

Guidelines on Conflicts help reduce ambiguities and much of the guesswork for arbitrators in deciding whether to make a disclosure.138 They also tend to reduce the risk for parties in making unsuccessful challenges and make it easier to identify challenges that are not made in good faith (i.e., when the basis for the challenge does not fit into a red or oranage list category).139 By creating clearer guidance to make the arbitrator selection process more transparent and predictable, the IBA Guidelines claim legitimacy through what Black would call ‘functional’ and ‘constitutional’claims.140

6.75 Despite apparent advantages in format, the Guidelines are criticized on several fronts,

including that in some instances they are ‘not strict enough’.141 Moreover, when they were first introduced, the Guidelines encountered significant scepticism from individuals and institutions.142 As Born explains: A number of arbitral institutions initially greeted the IBA Guidelines with some coolness . . . The ICC stated that it would not apply the IBA Guidelines (or other guidelines) in considering institutional challenge; the LCIA also indicated skepticism about the Guidelines’ usefulness in institutional challenges.143

  See ICC Rules.   Büthe and Mattli, The New Global Rulers 4 (‘Regulatory institutions that supply participatory mechanics that are fair, transparent, accessible, and open . . . are more likely to produce common interest regulation.’). 138 The shift from qualitative standards to quantitative categories has important effects, discussed in Chapter 8, regarding arbitrators’ duties. 139  There remains some debate about whether challenges to international arbitrators are on the rise, and whether any such possible increase is attributable to promulgation of the guidelines and the expanded disclosures they require. See Born 1895–8. 140  See Black, ‘Legitimacy and the Competition for Regulatory Share’ 18. 141  Robert B. Davidson, ‘Conflicts of Interest and Disclosure under US Law’, 17 No. 2 IBA Arb. News 97,98 (2012). 142  See, e.g., Markham Ball, ‘Probity Deconstructed: How Helpful, Really, Are the New International Bar Association Guidelines on Conflicts of Interest in International Arbitration’, 21(3) Arb. Int’l 323, 323–41 (2005); V.V. Veeder, ‘The English Arbitration Act 1996: Its 10th and Future Birthdays’ (2006), (‘[T]‌he IBA Guidelines on Conflict of Interest have provided a well-sprung platform for new tactical challenges to arbitrators, a malign practice that appears to be increasing everywhere.’). 143  Born 1891–2. 136 137

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Self-regulation in international arbitration Despite initial resistance, the IBA Guidelines on Conflicts quickly became an essential touchstone for parties, arbitrators, and institutions.144 In addition to confidence in their content, the perceived legitimacy of the Guidelines is also attributable to the profile of the IBA, the prominence of its drafters, and (at least partially) the timing of their project. By contrast to the Guidelines on Conflicts, the IBA’s earlier Rules of Ethics for International 6.76 Arbitrators (IBA Rules of Ethics), published in 1987, were rarely if ever cited, except occasionally in academic literature.145 Given the absence of perceived need for greater detail,146 the IBA Rules of Ethics in substance did little more than articulate general platitudes about what constitutes good behaviour.147 As analysed further later, they did not, for example, include a clear duty for arbitrators to investigate potential conflicts. The IBA Rules of Ethics were also drafted before the IBA even had an Arbitration Committee. No such committee existed because in the 1980s international arbitration was not necessarily recognized as a distinct practice area. Instead, the IBA’s Section on Business Law had a Committee on Procedures for Settling Disputes (Committee D), which appointed a drafting group led by three eminent lawyers who specialized in international arbitration.148 In the time since publication of the Rules of Ethics, international arbitration practice and its 6.77 role in the IBA have grown immensely. Today, the IBA’s Arbitration Committee boasts 2500 members from over 90 countries.149 Instead of being a stepchild of the Section on Business Law, the Arbitration Committee is one of the crown jewels of the Dispute Resolution Section, at least as measured by membership and prominence of arbitration-related programming at IBA events.150 The Arbitration Committee has distinguished itself by developing the popular IBA Rules on the Taking of Evidence in International Commercial Arbitration (IBA Evidence Rules), which were first published in 1999151 (and later revised in 2010).152

144   William W. Park, ‘Arbitrator Integrity: The Transient and the Permanent’, 46 San Diego L. Rev. 629, 676 (2009) (‘Perhaps the most oft-cited of these standards can be found in the IBA Guidelines. Rightly or wrongly, this list has entered the canon of sacred documents cited when an arbitrator’s independence is contested.’). 145  Notably, in a similar vein but on a more limited scale, Laurent Levy proposed a freelance ‘code of ethics’ for dissenting arbitrators. See Laurent Levy, ‘Dissenting Opinions in International Arbitration in Switzerland’, 5 Arb.Int’l 34, 41 (1989). 146  In the 1980s, when the Rules of Ethics were published, international arbitration had yet to transform itself from a largely informal compromise-oriented regime into a mechanism for managing complex disputes and producing technical law-based decisions in an increasingly transparent manner. For a description of this transformation, see paras 1.28–1.42. 147  Born 1881. 148  Those three individuals are today all leading arbitrators and scholars: Martin Hunter (England), Jan Paulsson (then of France), and Albert van den Berg (The Netherlands). 149  See IBA, Arbitration Overview, . 150  For instance, at the 2013 IBA Annual Conference, out of 80 committees, the IBA’s Arbitration Com­ mittee is sponsoring the third largest number of sessions (nine sessions), equalled only by the Taxes (nine sessions), Law Firm Management (12 sessions), and Corporate and M&A Law (13 sessions) Committees. See Annual Conference of the IBA: Final Programme, . 151  IBA Rules on the Taking of Evidence in Int’l Commercial Arbitration (International Bar Association 1999), . 152  See White and Case, 2012 International Arbitration Survey: Current and Preferred Practices in the Arbitral Process (Queen Mary Univ., 2012) (‘The IBA Rules on the Taking of Evidence in International Arbitration are

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Chanticleer, the Fox, and Self-Regulation 6.78 The process for drafting the Guidelines on Conflicts also contributed to their general accept-

ance. The working group itself included an exceptional array of talent and experience. Nevertheless, they engaged in extensive consultation with others, circulating an initial draft years before the final version and taking into account specific feedback produced by that initial draft. As Black explains, a consultation process like this is a means for a regulator (here, the IBA as a rule-maker) to increase its normative legitimacy.153

6.79 The IBA Guidelines on Conflicts were a response to dramatic changes in expectations

about transparency in international arbitration practice that had occurred since the 1980s,154 when the Rules of Ethics were drafted. In the 1980s, leading specialists were advocating restraint in disclosure requirements and their monopoly on arbitrator services was largely uncontested and uncontestable.155 By 2004 when the IBA Guidelines on Conflicts were published, as described in Chapter 2, new entrants had brought new expectations and increased interest in transparency. These trends were enough both to compel drafting of the Guidelines and to overcome initial resistance to the IBA Guidelines on Conflicts.

6.80 All this is not to say that the IBA Guidelines, however technically written, are simply

the product of an objective application of technical expertise to the problem of arbitrator conflicts. As scholars in other fields have observed, ‘global regulatory processes are not apolitical‌’.156 Such rule-making typically ‘has important distributional implications, generating winners and losers’.157 The political nature of global rule-making can also raise important implications both for the content of those standards and for their perceived legitimacy.

6.81 One example of the political dynamic with respect to the IBA Guidelines is with respect to

barristers. Historically, barristers from the same chambers could appear as counsel on opposite sides of the same case or in the same arbitration as arbitrator and counsel.158

6.82 Despite the history and apparent functionality of this approach in England and other

jurisdictions that have barristers practicing in chambers, the practice came under increasing pressure in international arbitrations.159 A primary reason is that practices in barristers’

used in 60% of arbitrations: in 53% as guidelines and in 7% as binding rules. In addition, a significant majority of respondents (85%) confirm that they find the IBA Rules useful.’). 153  Black, ‘Legitimacy and the Competition for Regulatory Share’ 16. 154  See Rogers, ‘Regulating International Arbitrators’ 55. 155  See para. 6.76. 156  Büthe and Mattli, The New Global Rulers 11. 157  Büthe and Mattli, The New Global Rulers 12. 158  See Born 1940. Barristers ethical rules permit such appearances, but impose strict duties of independence. Barristers’ chambers also have internal protocols that preclude one barrister from accessing, even accidentally, another barrister’s confidential client information under circumstances where confidentiality may be called into question. See Bar Council, Practice Management Guidelines, s. 6, art. 13 and app. 3 (2006) (UK), (indicating that guidelines are applicable when members of the same chambers are instructed on behalf of different parties or as arbitrator in cases involving other members of chambers). 159  See John Kendall, ‘Barristers, Independence and Disclosure’, 8 Arb. Int’l 287 (1992) (discussing several objections to arbitrators on grounds that they come from the same barristers’ chambers as the barristeradvocates in the same cases); Michael Polkinghorne and Emilie Gonin, ‘Barristers from the Same Chambers Appearing as Counsel and Arbitrator: Independence Revisited?’ 5 Disp. Res. Int’l 163 (2011); R. Doak Bishop and Lucy Reed, ‘Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators

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Self-regulation in international arbitration chambers differ from file-sharing that is the norm in law firms.160 The drafters of the IBA Guidelines on Conflicts attempted to respond to this conflict among 6.83 national traditions by requiring on the ‘orange list’ disclosure if ‘[t]he arbitrator and another arbitrator or the counsel for one of the parties are members of the same barristers’ chambers’.161 Inclusion on the orange list requires that the information be disclosed, but leaves open the possibility for the arbitrator to continue to serve, assuming he or she continues to believe that he or she can act independently,162 and generally in the absence of party objection.163 This battle over disclosure standards for barristers illustrates both the potential for political wrangling in the process of creating international rules, and the fact that solutions to those political quandaries involve winners and losers.164 This political dimension is the background against which the IBA Guidelines, like any other transnational private regulations, must establish their legitimacy. ii.  The duty to investigate In contrast to the long history of arbitrators’ duty to disclose, the related duty to investigate 6.84 is a relatively recent innovation. Most early judicial decisions refused to imply a duty to

in International Commercial Arbitration’, 14 Arb Int’l 395, 419–20 (1998) (‘Just as English barristers from the same chambers may represent opposing page interests in the English courts, it is not per se objectionable for them to represent opposing interests or serve as counsel and arbitrators in arbitrations.’); David Edwards and David Foster, ‘Challenges to Arbitrators’, in Global Arbitration Review: The European & Middle Eastern Arbitration Review (2008) (discussing Laker Airways v FLS Aerospace [1999] 2 Lloyds Rep 45, confirmed in Smith v Kvaerner Cementation Foundations Ltd [2006] 3 All ER 593 (UK)); John W. Hinchey and Troy L. Harris, International Construction Arbitration Handbook § 6:27 (‘Questions, with no clear answers, have arisen with respect to English lawyers as to whether an arbitrator/barrister would be disqualified because one of the parties is represented by a counsel from the same chambers.’); Roy S. Mitchell, ‘Cultural Sensitivities in International Construction Arbitration’, 2 Faulkner L. Rev. 325 (2011). 160   Apart from systems predicated on the English model, law firms, not barristers’ chambers, are the prevailing model for legal professionals. File-sharing and fee-sharing are the norm in law firms and, consequently, ethical rules create both conflicts and privileges among members of the same law firm. In contrast to these rules, the rule permitting barristers from the same chambers to serve as both arbitrator and counsel is an anathema in many other systems. According to a survey by Berwin Leighton Paisner in 2010 of non-English lawyers and nonEnglish parties regarding perceptions about barristers’ conflicts of interest, nearly two-thirds (for lawyers) and three-quarters (of parties as estimated by their attorneys) were either ‘very negative’ or ‘fairly negative’ when asked about barristers from the same chambers appearing as arbitrator and counsel in the same dispute). Jonathan Sacher, ‘International Arbitration: Research based report on perceived conflicts of interest’, Berwin Leighton Paisner LLP, [Berwin Leighton Paisner survey]. Notably, the existence of so-called ‘Chinese walls’ and other safeguards, which as noted are standard practice in barristers’ chambers, made the situation ‘much more acceptable’ to 50% of the respondents, the absence of shared financial interests made the situation ‘much more acceptable’ to 40% of the respondents, and the fact that the arbitrator and the opposing counsel would not know each other well made the situation ‘much more acceptable’ to nearly 45% of respondents. Berwin Leighton Paisner survey. See also Daele, Challenge and Disqualification of Arbitrators in International Arbitration 326. This study seems to confirm two important things. First, a significant amount of resistance to barristers is based on lack of understanding of how barristers’ chambers operate. Second, that even with clearer information about how barristers’ chambers actually operate (no general access to information, no shared financial arrangements, and potential absence of personal relationships), perceptions about barristers’ potential conflicts remain constant for some non-English attorneys and clients. 161  IBA Guidelines on Conflicts of Interest in International Arbitration, art. 3.3.2 (2004) [IBA Conflicts Guidelines]. 162  See IBA Conflicts Guidelines, General Standard 3(b). 163  The potential for appointment over party objection is addressed in Chapter 8. 164  See Sida Liu, ‘The Local Profession as a Social Process: A Theory on Lawyers and Globalization’, 38 Law & Soc. Inquiry 670 (2013).

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Chanticleer, the Fox, and Self-Regulation investigate potential conflicts of interest,165 and rules of leading arbitral institutions were similarly silent. When disclosure standards were vague, the absence of a duty to investigate arguably created an incentive to turn an intentionally ‘blind eye’ to any possible conflicts. Ignorance about an alleged conflict would allow arbitrators a complete defence against either non-disclosure or the underlying conflict itself. 6.85 Today, at the international level arbitrators are generally understood as having a duty to

investigate. That duty was first codified by private international arbitral institutions and organizations. The 1987 IBA Rules of Ethics were apparently the first source to suggest that there might be such an obligation, but they framed the obligation as narrow and related only to what the IBA Rules referred to as ‘indirect relationships’.166 The duty to investigate was formalized and clarified in 2004, when the IBA published its Guidelines on Conflicts of Interest in International Arbitration167 and the American Arbitration Association/American Bar Association (AAA/ABA) Code of Ethics for Arbitrators in Commercial Disputes was published.168

6.86 More recently, in 2008, the ICC modified its standard statement of acceptance and inde-

pendence to refer to a duty to make ‘due enquiry’,169 and the 2012 version of the ICC Statement of Acceptance requires arbitrators to confirm the absence of conflicts ‘to the best of [his/her] knowledge’, and that such assertion is after ‘having made due enquiry’.170 Virtually all arbitral rules and procedures now either include an express duty to investigate171 or have been interpreted to imply such a duty.172

165   Al-Harbi v Citibank, NA, 85 F.3d 680, 682 (D.C. Cir. 1996). See also Gianelli Money Purchase Plan & Trust v ADM Inv. Serv. Inc., 146 F.3d 1309, 1312 (11th Cir. 1998); Lifecare Int’l Inc. v CD Medical, Inc., 68 F.3d 429 (11th Cir. 1995) (no duty to investigate past conflicts); Betz v. Pankow, 31 Cal.App.4th 1503 (Cal. Ct. App. 1995) (no adverse inferences from arbitrator’s failure to identify conflict). But see Schmitz v Zilveti, 20 F. 3d 1043 (9th Cir. 1994) (finding ‘evident partiality’ even when an arbitrator was unaware of relevant facts because arbitrator has a duty to investigate that is independent of duty to disclose). 166   IBA Rules of Ethics for International Arbitrators, R. 4.2(a) (1987) [IBA Rules] provides that ‘[n]‌on-disclosure of an indirect relationship unknown to a prospective arbitrator will not be a ground for disqualification unless it could have been ascertained by making reasonable enquiries’. The IBA Rules define ‘indirect relationships’ as those involving ‘a member of the prospective arbitrator’s family, his firm, or any business partner who has a business relationship with one of the parties’. IBA Rule 3.3. Given that the obligation to enquire applies only to indirect relationships, it was apparently assumed by drafters of the IBA Rules that an arbitrator could not be unaware of conflicts involving direct relationships. That assumption is no longer viable under modern complexities of arbitrators’ so-called direct relationships. 167  The IBA Conflicts Guidelines, discussed in greater detail in para 6.83, provide that ‘an arbitrator is under a duty to make reasonable enquiries to investigate any potential conflict of interest, as well as any facts or circumstances that may cause [his/her] impartiality or independence to be questioned’. General Guideline 7(c). 168  Canon II(B) of the AAA/ABA Code of Ethics for Arbitrators in International Disputes (2004) [AAA/ ABA Code] provides that ‘persons who are requested to accept appointment as arbitrators should make a reasonable effort to inform themselves of any interests or relationships’ that may give rise to a conflict. 169  See Daele, Challenge and Disqualification of Arbitrators in International Arbitration 55. 170  2012 Rules: ICC Arbitrator Statement of Acceptance, Availability, Impartiality and Independence (on file with author). 171  AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes, Canon II.B (2004). 172  For example, although the ICSID Rules are silent about any duty to disclose, a few high-profile annulment cases have read into the arbitrator qualifications and appointment process a continuous duty on arbitrators to investigate potential conflicts. See, e.g., Compañía de Aguas del Aconquija S.A. v Argentina, ICSID Case No. ARB/97/3, Decision on the Argentine Republic’s Request for Annulment of the Award rendered on 20 August 2007, 10 Aug. 2010, n. 63.

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Self-regulation in international arbitration National law, by contrast, still lacks any coherent consensus about the existence of a duty to 6.87 investigate.173 Some national court precedents have found or implied a duty to investigate,174 and held that failure to investigate could be the basis for annulling or refusing recognition or enforcement of an award.175 In finding such a duty, however, many judicial precedents have expressly relied on the existence of such a duty under arbitral rules.176 The evolution of the duty to investigate, and standards for disclosure in the previous section, 6.88 are striking because the most significant developments were initiated at the international level, predominantly by private international arbitral institutions, and in contravention of individual arbitrators’ narrow self-interest. The prominence of private arbitral institutions and related international organizations in establishing the substantive standards for arbitrator conduct is no accident. It reflects their unique technical expertise, self-interest in effective regulation of arbitrator conduct, and related perceptions of legitimacy in promulgating these standards. b. Enforcement As analysed previously,177 ethical rules that are developed for specialized practice settings are 6.89 most effective if they are enforced in that same context. This prescription means that they should be interpreted and applied by the institutions that are most competent and have the greatest incentives to perform the necessary regulatory functions. For arbitrators, arbitral institutions not only led in developing substantive standards for arbitrator disclosure and disqualification, but they also operate as the primary regulators in enforcing those standards. This regulatory power is primarily implemented through administration of arbitrator selection and challenge procedures, described later in sub-section i, but also in new ad hoc regulatory functions, described in sub-section ii, and possibly future certification, described in sub-section iii. i.  Selection and challenge procedures Under most arbitral rules, selection and challenge procedures are administered by arbitral 6.90 institutions and through procedures established by arbitral rules for constituting the tribunal. Once arbitrators make prescribed disclosures, arbitral procedures require parties to

  See Born 1959–60.   Locabail (UK) Ltd. v Bayfield Properties Ltd., [1999] EWCA (Civ) 3004, [2000] QB 451, 478 (Lord Bingham); Applied Indus. Materials Corp. v Ovalar Makine Ticaret Ve Sanayi, A.S., 492 F.3d 132, 138 (2d Cir. 2007) (reasoning that an arbitrator must investigate potential conflicts or disclose an intent not to investigate; emphatically rejecting the notion that it was creating a free-standing per se affirmative duty to investigate); New Regency Prods., Inc. v Nippon Herald Films, Inc., 501 F.3d 1101, 1107–8 (9th Cir. 2007) (arbitrator’s absence of knowledge of conflict is relevant, where arbitrator has taken reasonable steps to investigate conflicts, but not dispositive); SA J&P Avax SA v Tecnimont SPA, Cour d’appel [CA] [regional court of appeal] Paris, 1 e ch., 12 Feb. 2009, 1 Rev. Arb. 186 (2009) (with commentary by Tomas Clay) (finding existence of a duty to investigate) reversed on other grounds, J&P Avax SA v Tecnimont SPA, Cour d’appel Reims, 2 Nov. 2011, case no 10/02888 (Fr.). 175  Applied Indus. Materials, 492 F.3d, 138 (‘The mere failure to investigate is not, by itself, sufficient to vacate an arbitration award. But, when an arbitrator knows of a potential conflict, a failure to either investigate or disclose an intention not to investigate is indicative of evident partiality.’). 176  See, e.g., New Regency Prods., 501 F.3d, 1110 (noting that ‘Canon II(B) of the code [the American Arbitration Association and American Bar Association Code of Ethics for Arbitrators in Commercial Disputes] . . . provides that arbitrators have an ongoing duty to “make a reasonable effort to inform themselves of any interests or relationships” subject to disclosure’ and that ‘General Standard 7(c) of the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (2004) states that “[a]‌n arbitrator is under a duty to make reasonable enquiries to investigate any potential conflicts of interest, as well as any facts or circumstances that may cause his or her impartiality or independence to be questioned”.’). 177  See paras 6.39–6.43. 173 174

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Chanticleer, the Fox, and Self-Regulation assert challenges based on alleged conflicts, and provide for how arbitral institutions and appointing authorities will rule on such challenges.178 While Chapter 2 reviewed the functional details of these procedures, the important point for this chapter is that in administering these procedures, arbitral institutions operate as primary regulators. 6.91 Pursuant to most arbitral rules, until recently, the basis for institutions’ rulings on challenges

were not disclosed. Ambiguities about how arbitral institutions resolve challenges to arbitrators ultimately concern the lack of transparency and parties’ need for more information.179 In response, leading arbitral institutions have begun to publish information about how specific challenges have been handled. The Stockholm Chamber of Commerce gets credit for being the first mover, as for many years it published summary reports of its challenge decisions.180 Similarly, the ICC published three reports containing general summaries of the outcomes of its challenge decisions, although without providing any reasons for those decisions.181 The most ambitious effort was by the London Court of International Arbitration (LCIA), which with tremendous effort and fanfare published redacted versions of its actual challenge decisions.182

6.92 Publication of institutional challenge decisions demonstrate the need, identified by Wilkins,

for assessments of professional conduct to be ‘open and accessible to ensure that information about the conduct in question and the standards being applied can be reviewed, critiqued, refined, and internalized’.183

6.93 Increased transparency regarding institutions’ challenge rulings is also important because,

under most arbitral rules, the decisions made through these procedures are treated as ‘final’. As such, because arbitral rules contain ‘finality clauses’, institutions’ rulings on arbitrator challenges are not subject to being re-evaluated under the arbitral rules.184 National   For a summary of these procedures, see Born 1912–55.   See James H. Carter, ‘Reaching Consensus on Arbitrator Conflicts: The Way Forward’, 6 Disp. Res. Int’l 17, 17 (2012) (‘The absence of consensus about arbitrator conflicts is largely the result of a lack of publicly available information. Most disputes about arbitrator conflicts of interest are resolved by arbitral institutions without any reasoned decision or public record.’). 180   Marie Johansson, Decisions by the Arbitration Institute of the Stockholm Chamber of Commerce Regarding Challenge of Arbitrators, 2 Stockholm Arb. Rep. 175, 180–2 (1999); Marie Öhrström, ‘Decisions by the SCC Institute Regarding Challenge of Arbitrators’, 1 Stockholm Arb. Rep. 35, 46–8 (2002); Annette Magnusson and Hanna Larsson, ‘Recent Practice of the Arbitration Institute of the Stockholm Chamber of Commerce—Prima Facie Decisions on Jurisdiction and Challenges of Arbitrators’, 2 Stockholm Arb. Rep. 47, 70–3 (2004); Helena Jung, ‘SCC Practice: Challenges to Arbitrators SCC Board Decisions 2005–2007’, 1 Stockholm Int’l Arb. Rev.1, 5–6 (2008); Niklas Lindström, ‘Challenges to Arbitrators—Decisions by the SCC Board during 2008–2010’, 5 SCC Newsletter 1 (2011); Felipe Mutis Tellez, ‘Arbitrators’ Independence and Impartiality: A Review of SCC Board Decisions on Challenges to Arbitrators (2010-2012)’, Electronic Library of the Arbitration Institute of the Stockholm Chamber of Commerce (2013), . 181  See, e.g., Anne Marie Whitesell, ‘Independence in ICC Arbitration: ICC Court Practice concerning the Appointment, Confirmation, Challenge and Replacement of Arbitrators’, ICC Arb. Bull. (Independence of Arbitrators—Special Supplement, 2007), 11. 182  See 27(3) Arb. Int’l, at 283 et seq. (2011) (providing redacted LCIA challenge decisions from 1996 to 2010); Geoff Nicholas and Constantine Partasides, ‘LCIA Court Decisions on Challenges to Arbitrators: A Proposal to Publish’, 23 Arb. Int’l. 1 (2007) (outlining reasons for LCIA to publish redacted challenge decisions). 183  Wilkins, ‘Who Should Regulate’ 884. 184  See, e.g., ICC Arbitration Rules, art. 15(2), (3) (2012) (permitting removal by the ICC Court and allowing parties an opportunity to comment on process); LCIA Arbitration Rules, art. 10(1), (2) (1998) (upon party challenge, the LCIA Court ultimately decides whether to revoke arbitrator appointment); ICDR International Arbitration Rules (2010), art. 9 (‘If the other party or parties do not agree to the challenge or the 178 179

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Self-regulation in international arbitration courts may still operate as a final check,185 but not based on the standards in arbitral rules. In the words of one English court, ‘[T]‌he finality provision [in Article 7(4) of the 1998 ICC Rules does not mean] that the English courts have no power to review the decision of the ICC Court’; meaning that subsequent review is under national English law, not the ICC Rules.186 In their independent review under national law, English courts have indicated arbitral institution’s challenge decisions are ordinarily accorded substantial deference, even if in applying a different standard, they are not technically deferring.187 Under this general framework, national courts have only rarely ever effectively ‘overruled’ an 6.94 arbitral institution’s rejection of alleged conflict. Most often, challenges in national courts involve alleged conflicts that were never presented to an arbitral institution because the conflict arose or was discovered after the close of proceedings. A judicial decision that is inconsistent with an arbitral institution’s ruling is rare because national standards generally provide narrower grounds for challenge than those imposed by arbitral institutions or the IBA Guidelines on Conflicts.188 One contrary example, notable precisely because it is so exceptional, is the decision of the 6.95 Court of Appeal of Paris in J&P Avax SA v Société Tecnimont SPA. In that case, a French Court of Appeal applied Article 1502(2) of the French Code of Civil Procedure to set aside an ICC award on the ground that the arbitrator had failed to disclose a conflict of interest.189 The court reached this decision despite the fact that the ICC Court had dismissed the challenge as inadmissible because it was asserted too late.190 The Tecnimont case reminds

challenged arbitrator does not withdraw, the administrator in its sole discretion shall make the decision on the challenge.’); ICSID Arbitration Rules, R. 9 (2006) (granting ICSID Chairman discretion to disqualify arbitrator); SCC Arbitration Rules, arts. 15, 16 (2010) (granting SCC Board power to remove arbitrator); SIAC Rules, art. 13 (2013) (granting SIAC power to dismiss and appoint arbitrators); HKIAC Administered Arbitration Rules, art. 11 (2013) (granting HKIAC power to decide on arbitrator challenges). 185   Certainty about the effective finality arbitral institution decisions on challenges has itself evolved over time. Compare Jean-Yves Art, ‘Challenge of Arbitrators: Is An Institutional Decision Final?’ 2 Arb. Int’l 261 (1986) (outlining differences in French and Swiss law that ensure finality of ICC decisions in France but not in Switzerland), with Pierre Lalive, ‘Absolute Finality of Arbitral Awards?’ (2008), , 18 (commenting that ‘national legislations and courts have adopted a restrictive attitude regarding the grounds permitting the setting aside of Awards’ but questioning the correctness of questioning the finality of some Awards). 186   AT & T Corp. 187   See, e.g, AT & T Corp. (‘[T]‌he court, if required to interpret the ICC Rules, would naturally pay the closest attention to any interpretation of the ICC Rules adopted by the ICC Court, but the English courts retain their jurisdiction to determine whether the ICC Rules have been breached when entertaining an application to remove for alleged misconduct.’). Chapter 2 analysed how, when courts apply a national or convention standard to assess arbitrator conduct, they are not technically ‘deferring’ to an institution’s decision, but instead ruling consistent with it. See paras 2.72–2.78. 188   Born 1951 (‘In general, [arbitral] rules require somewhat broader disclosure than national law standards, although this varies somewhat from jurisdiction to jurisdiction and institution to institution.’). 189   J & P Avax SA, Reims. 190   The Reims Court of Appeal reasoned that ‘a challenge before the ICC and an application to a judge to set aside the award are separate proceedings, which do not serve the same purpose and are not controlled by the same authority’. See J & P Avax SA, Reims (‘Considérant que la récusation devant l'institution d'arbitrage et le contrôle de la sentence devant le juge de 1' annulation sont des procédures distinctes qui n'ont pas le même objet et ne sont pas soumises à la même autorité.’) (English translation by Georgios Soumalevris, ).

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Chanticleer, the Fox, and Self-Regulation us that national courts still provide a final check on arbitrator bias. Although decisions like Tecnimont are rare, when an award is annulled or refused enforcement based on alleged arbitrator misconduct, its effect reverberates throughout the international arbitral regime. Decisions like Tecnimont are highly publicized, scrutinized, and debated in the international arbitration network described earlier.191 As a result, they become incorporated into community standards about arbitrator conduct and future regulatory assessments by institutions. By providing back-up legal enforcement, decisions like Tecnimont illustrate what Braithwaite calls ‘enforced self-regulation’, meaning severe State sanctions when self-regulation apparently breaks down.192 6.96 Like the evolution of disclosure obligations, increased transparency regarding institutional

decision-making is typical of efforts by non-state actors to increase their legitimacy. Black observes that ‘[r]‌egulators can increase their legitimacy by providing information on aspects of their existing activities which they think will provide a basis for acceptance from different legitimacy communities’.193 Here, arbitral institutions were seeking to increase their legitimacy by making selection and challenge procedures more transparent, and also using disclosure as a means of increasing efficiency in issuing awards. These efforts are a natural response to increased competition among arbitral insitutions, and related pressure to respond to party concerns about unwarranted delays or other infrequent but disruptive forms of arbitrator misconduct.194 ii.  Control over compensation and ad hoc regulatory functions

6.97 While not usually characterized as a form of regulation, arbitral institutions’ control over

compensation for arbitrators’ fees and costs incurred fits within modern meanings of ‘regulation’.195 Institutions have various methodologies for how arbitrators are compensated. One feature they all have in common, however, is that they retain ultimate control over the amount of compensation finally paid to arbitrators.196

6.98 Under the ICC Rules, for example, the ICC Court has sole discretion to fix arbitrators’ fees

in accordance with an established fee scale,197 based on the amount in dispute and within ‘its discretion’.198 In setting arbitrators’ fees, the ICC Court of Arbitration considers a list of factors, including the diligence of the arbitrators, the time spent, the rapidity of the proceedings,

  See para. 6.51.   See Braithwaite, ‘Enforced Self-Regulation’ 1471. 193  Black, ‘Legitimacy and the Competition for Regulatory Share’ 17. 194  Michael P. Malloy, ‘Current Issues in International Arbitration’, 15 Transnat’l Law. 43, 45 (2002) (noting that ‘competition among arbitration institutions for the growing number of international commercial arbitrations has moved their respective technical details closer to conformity’). 195  See Black, ‘Decentring Regulation’ 129 (defining regulation as any mechanism for controlling behaviour in accordance with identified regulatory goals). 196  Compare ICDR Arbitration Rules, art. 32 (2010) (compensation based on amount of service, taking into account their stated compensation rate and case size and complexity, set by negotiation with administrator), with ICC Arbitration Rules, art. 37(1) (2012) (providing for institutionally created fee scale), and LCIA Arbitration Rules, art. 5.3 (1998) (allowing each arbitrator to ‘agree in writing upon fee rates conforming to the Schedule of Costs’ but capped at £450). 197  Article 37(1) provides that the applicable fee scale is ‘the scale in force at the time of the commencement of the arbitration’. The Scales of Administrative Expenses and Arbitrator’s Fees set forth in the 2012 ICC Rules are effective as of 1 Jan. 2012 in respect of all arbitrations commenced on or after such date, irrespective of the version of the Rules applying to such arbitrations. 198  ICC Arbitration Rules, art. 37(1), (2), app. III (arts. 2(1), 2(2), 4(1)) (2012). See also Derains and Schwartz, Guide to the ICC Rules of Arbitration 357–62. 191 192

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Self-regulation in international arbitration and the complexity of the dispute.199 More specifically, representatives of the ICC have stated publicly that they have ‘punished’ delayed awards or other arbitrator dereliction with reduced fees.200 Control over the purse strings by which arbitrators are compensated is an important tool for ensuring arbitrators comply with obligations that contribute to efficiency. In addition to developing and enforcing clearer and more demanding standards, arbitral 6.99 institutions have also asserted several independent, ad hoc regulatory powers. For example, the ICC Secretariat ‘spot-checks its electronic database to ascertain whether arbitrators have made proper disclosure about prior or pending ICC arbitrations’ and in ‘several cases’ has ‘discovered undisclosed information through this process’.201 Upon discovering such omitted information, the Secretariat may request that the arbitrator supplement disclosure or inform the ICC Court or the Secretary-General of an arbitrator’s failure to disclose information as part of the confirmation process.202 In a similar vein, most institutions reserve for themselves discretion to appoint or to remove 6.100 an arbitrator on their own initiative and independent of party objection or consent.203 In addition, most institutions also have an informal, unwritten, internal ‘blacklist’ of arbitrators whom they will not select when acting as an appointing authority. In some extreme cases, arbitral institutions may even refuse to appoint an arbitrator to whom the parties agree. Overruling party preference with regard to arbitrator selection is a rather extreme measure, but arbitral institutions and appointing authorities have an interest in avoiding appointment or reappointment of arbitrators who are seriously unreliable or have committed significant transgressions.204 In addition to controlling individual arbitral proceedings, institutions also play a role in 6.101 future appointments. One way institutions affect future appointments is through use of lists of potential arbitrators that parties are either encouraged to use or, in some rare instances, required to use.205 Some commentators have expressed scepticism about the value of such lists.206 Whatever practical function they may serve during the selection process, these lists function as a form of self-regulation. Formal or informal controls on entry are, according to most sociological profiles, a typical form of self-regulation among professions.207 For example, the AAA has a stated policy of only nominating ‘qualified’ arbitrators from its existing rosters, which it advertises as highly ‘select’ and open only to a limited number of arbitrators.

199  ICC Arbitration Rules, app. III (art. 2) (2012) (‘[I]‌n exceptional circumstances’ the Court may arrive at a figure higher or lower than the limits set in Article 37(2)). 200  Jason Fry, et al., The Secretariat’s Guide to ICC Arbitration (ICC, 2012). 201 Daele, Challenge and Disqualification of Arbitrators in International Arbitration 55–6. 202 Daele, Challenge and Disqualification of Arbitrators in International Arbitration 55–6. 203  See Born 1383 (under ‘virtually all institutional rules, the parties’ individual nominations or joint proposals are subject to review by the arbitral institution for suitability (e.g., impartiality, experience)’). 204  See Born 2102 (‘Just as an arbitration is no better than the arbitrators, so an appointing authority is no better than its staff and decision-makers.’). 205  China International Economic and Trade Arbitration Commission [CIETAC] Arbitration Rules, art. 24 (2012). The CIETAC Rules originally required selection of arbitrators from a CIETAC list, but more recently have been amended to permit parties to agree on other arbitrators. See also China Maritime Arbitration Commission Arbitration Rules, art. 25 (2004) (requiring parties to choose arbitrators from a list). 206  For a critical view of institutional lists, see Born 1673 (‘A number of leading arbitral institutions have either refused to adopt even non-binding lists of names from which arbitrators may be selected or have found these lists of little positive value (and some negative effect).’). 207  See Abel, American Lawyers 27.

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Chanticleer, the Fox, and Self-Regulation To qualify, a candidate must attend training sessions administered by the AAA, as well as possess certain minimum professional qualifications. 6.102 Lists also create the possibility of removal from such lists as a potential sanction for profes-

sional misconduct. For example, the AAA has a well-known ‘one-strike-you’re-out’ policy. Under this policy, an arbitrator whose award is challenged for improper non-disclosure goes on inactive status and will not be nominated to future arbitrations while the judicial challenge is pending.208 Even after a final judicial decision, including a decision that upholds an award, the AAA makes a separate determination of whether the arbitrator should ever be restored to active status on the roster. The Milan Chamber for National and International Arbitration has published a similar policy incorporated in its Code of Ethics, which is appended to its arbitral rules.209

6.103 Institutions that do not establish formal lists or panels of arbitrators nevertheless also have

informal means of cataloguing individuals from among whom they appoint arbitrators when charged with that task. For example, when appointing arbitrators, the ICC solicits names from its national committees and ‘selects a candidate from its extensive database of experienced practitioners’.210 While the ICC does not specify what criteria are required for admission to the database, in selecting arbitrators ICC personnel inevitably consider institutional knowledge about arbitrators, including internal records of sub-optimal conduct in past arbitrations. Similarly, other institutions also consider an arbitrator’s past conduct when making appointments. In this respect, formal or informal disqualification from appointments provides another regulatory check on arbitrator conduct.

6.104 In the absence of formal licensure, arbitral institutions and appointing authorities are today the

most visible and effective regulator of arbitrators. They have a permanence and tangibility that makes them naturally well suited to serve as regulators. They also have unique expertise based on their intimate knowledge of and direct involvement in arbitration practices and procedures, and a unique ability to operate in a multi-national, multi-cultural environment.211

6.105 Despite performing this function, apart from a few arbitral institutions noted previously,212

most institutions do not have established formal policies for responding to arbitrator misconduct. Instead, they employ indirect mechanisms, most obviously through the selection, appointment, and challenge procedures, but also through some indirect means, described later.213

6.106 This informality is inevitable and in some respects necessary, but it also necessarily implies

a lack of transparency. The primary function of arbitral institutions is to administer

208  See American Arbitration Association, ‘Failure to Disclose May Lead to Removal from the National Roster of Neutrals’, . 209  Camera Arbitrale Nazionale e Internationale Milano, Code of Ethics of Arbitrators, art. 13 (2010) (noting that an arbitrator who does not comply with the Code of Ethics will be replaced and may also be refused participation in future proceedings because of the violation), . 210  United States Council for International Business, ‘FAQs on ICC Arbitration’, . 211  cf. Wilkins, ‘Who Should Regulate’ 884–85 (proposing that with attorneys, regulators with the greatest institutional competence be assigned primary regulatory authority). 212  See para. 2.82. 213  See paras 6.89–6.96.

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Self-regulation in international arbitration international arbitration cases. That function imposes on them confidentiality and fairness obligations that limit what they can do. Competition among institutions, however, pressures institutions to be more accountable.214 For example, as examined previously, arbitral institutions were rightly pressed to publish 6.107 more detailed information about their challenge decisions.215 Arbitrators’ names, however, are necessarily redacted from these published sources. Moreover, the stores of information institutions accumulate internally is not generally provided directly to parties, even if that information would be extremely valuable to them in the arbitrator selection process. Instead, it remains confidential in the hands of arbitral institutions and outside of consideration when parties are selecting arbitrators. If more publicly available, such information could operate as a form of market-based regulation and accountability for arbitrators. One potential solution to this information conundrum, explored in Chapter 8, is the development of an independent resource that collects and makes publicly available information and feedback about arbitrators.216 iii.  Arbitrator certification or licensure The most classic form of self-reguation involves licensing or certification. Formal certifica- 6.108 tion or licensure could be a means for providing training and quality control for new arbitrators, particularly from jurisdictions that do not have established traditions of arbitration from outside mega-multi-national law firm practice. While certification of international arbitrators may seem like a remote possibility 6.109 today, certification is a reality for international mediators. The International Mediation Institute (IMI) has a well-regarded and effective certification programme for mediators. The IMI’s model includes submission requirements that members have minimal training through qualified programmes, abide by its code of ethics, and provide feedback from parties.217 For arbitrators specifically, the Chartered Institute of Arbitrators, or ‘CIArb’, has a 6.110 well-established certification programme. The CIArb refers to itself as a ‘Professional Organization for Arbitrators, Mediators and Adjudicators’218 and lists having a ‘prestigious secondary professional qualification’ as among the benefits of membership.219 The CIArb has stringent, published entry requirements, which may include extensive training, passing

214  While this book does not address directly the ethics and professional obligations of arbitral institutions, they are increasingly a focus of attention and deserving of study. Menkel-Meadow, working with the CPR, has been at the forefront of these issues in the United States. See CPR-Georgetown Commission on Ethics and Standards of Practice in ADR, Principles for ADR Provider Organizations (2002) [‘Principles’], . For an excellent work by a promising young scholar that provides an important starting point for these issues in international arbitration, see Barbara Alicja Warwas, The Three Pillars of Institutional Arbitral Liability: The Weaknesses of Current Regulations and Proposals for Further Reform, Ph.D. thesis, (Florence: European University Institute, 2013), (on file with author). 215  See para. 2.68. 216  See paras 8.94–8.107. 217  See ‘How to become IMI Certified’, . 218  Chartered Institute of Arbitrators, ‘Home’, . 219  The CIA website describes that one of the benefits of membership is the ‘opportunity to network with professionals engaged in a wide range of disciplines’. Chartered Institute of Arbitrators, ‘Membership Benefits’, .

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Chanticleer, the Fox, and Self-Regulation an examination, and completing an interview.220 It also has a relatively detailed code of ethics and related practice guidelines that pertain to arbitrator members. Most interesting of all, the CIArb has a grievance procedure for complaints against arbitrator members.221 This process was recently invoked to expel and publicly condemn an arbitrator for a more than four-year delay in rendering an award and for ‘repeatedly making promises which proved to be empty and meaningless’ about when the award would be forthcoming.222 6.111 While CIArb boasts robust membership, not all assessments of it are uniformly positive. It

is also not certain that formal licensure would be a meaningful substitute for processes and credentials that currently prevail in the market for international arbitrators. As described in Chapter 2, experience and reputation established through previous service as an arbitrator is the primary credential.

c. National alternatives 6.112 Before concluding this Section, it is worth pausing to consider how arbitrator regulation would function if arbitrators were primarily regulated through domestic standards and national institutions. As already described, to date most national courts have exercised admirable restraint, providing an effective backstop, but not disrupting or interfering with arbitral processes. National courts are not, however, the only potential source for disruptive intervention. 6.113 As previewed in Chaper 2, national legislatures and bar authorities may seek to regulate arbi-

trators sitting locally or locally licensed attorneys who serve as international arbitrators.223 For example, the California legislature has adopted aggressive new rules regulating arbitrators, which do not purport to apply directly to international arbitration, but have caused consternation nonetheless.224 Similarly, a proposal by Professor Carrie Menkel-Meadow in

220   Chartered Institute of Arbitrators, ‘Special Member Assessment’, . 221   It appears that the CIA grievance procedure was originally tailored to consumers involved in the CIA’s domestic consumer arbitration. See Chartered Institute of Arbitrators, ‘DRS-CIArb’, . Since its initiation, complaints appear to have overwhelmed the grievance procedure (evidently in the domestic context). See Tony Bingham, ‘Guilty As Charged’ (commenting that the grievance procedure has also drawn some stiff rebuke from arbitrators who are, predictably, resistant to being subjected to formal investigation of their conduct), . Critics characterize the CIAarb process as a ‘court-marshal’ approach to arbitrator regulation. 222  Disciplinary Tribunal of The Chartered Institute of Arbitrators, (decision expelling arbitrator ‘from the Chartered Institute of Arbitrators with immediate effect’ and ordering payment to the Institute ‘of £3,000 plus VAT towards the costs incurred by the Institute’). 223  See paras 2.92–2.95. 224  The legislation was adopted after a local paper ran ‘a series of articles featuring horror stories about the inequities of arbitration’. See Ruth V. Glick, ‘California Arbitration Reform: The Aftermath’, 38 USF. L. Rev. 119, 120 (2003). The rules substantially expand arbitrator disclosure requirements, provide mechanisms for regulating arbitrator action, increases the bases for disqualifying arbitrators, and (some speculate) may increase the bases for vacating awards. Id. 121–2. Notably, the new ethical rules do not apply to international arbitrators. Glick, ‘California Arbitration Reform’ 123 n. 26; see also Ruth V. Glick, ‘Should California’s Ethics Rules Be Adopted Nationwide?: No! They Are Overbroad and Likely to Discourage Use of Arbitration’, Disp. Resol. Mag., Fall 2002, 13, 13–4; ‘Judicial Council of California Adopts Ethics Standards for Private Arbitrators’, 13 World Arb. & Mediation Rep. 176 (2002) (noting that notwithstanding adoption of new standards, several members suspect that the volume of information that must be disclosed under California’s new standards ‘may be too burdensome’ and could ‘be used too readily’ to disqualify arbitrators).

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Self-regulation in international arbitration cooperation with the International Institute for Conflict Prevention and Resolution (‘CPR’) and the Georgetown Law Center would implement a new Model Rule for Lawyers Acting as Third Party Neutrals, which would be incorporated into the United States Model Rules of Professional Conduct for lawyers.225 This new rule would impose on arbitrators its own version of impartiality (and other) obligations.226 As examined in Chapter 2, the Rule is interpreted as expanding significantly international disclosure obligations.227 While the proposed Model Rule has not been enacted by the ABA, some other national bar authorities have adopted similar rules that apply when their attorneys act as arbitrators.228 In the domestic context, national bar authorities arguably have an important and appropri- 6.114 ate role in regulating domestic arbitrators. If domestic arbitrators are lawyers, they are most likely locally licensed. Moreover, standards that apply to domestic arbitrators’ conduct, as well as the law and procedures that apply in arbitrations over which they are presiding, are all most likely local law. National authorities quite naturally fit into that regulatory space. National authorities are less fitting as regulators of international arbitrators, who are subject to international standards promulgated and primarily enforced by international arbitral institutions and organizations. If national bar authorities were to supplement this regulatory framework with new national rules enforced by domestic entities, the meaning of obligations such as impartiality would be fragmented and disaggregated. This section has examined how arbitrators, arbitral institutions, and related organizations 6.115 can and have developed responsible, reliable, and highly sophisticated standards and procedures for ensuring ethical conduct. Effectiveness is ensured by a variety of factors, including arbitrators’ specialized knowledge and professional ethos, and institutions’ incentives to attract parties by ensuring proceedings are fair and awards enforceable. To the extent that these efforts fall short, national courts retain the power to annul or refuse enforcement of awards tainted by alleged misconduct. In contrast to the well-functioning self-regulatory regime for international arbitrators, attor- 6.116 neys in international arbitration continue to be subject to uncertain, multiple, and fragmented ethical obligations that primarily derive from, and are presumed to be enforceable only by, national institutions. The final section of this chapter considers the extent to which incentives and interests similar to those for international arbitrator regulation can produce an effective self-regulatory regime for counsel in international arbitration. 3.  Self-regulation of counsel in international arbitration As clashes over ethical conflicts have become more frequent and more disruptive,229 consen- 6.117 sus has emerged about the need for regulation of counsel ethics in international arbitration.

225  See CPR-Georgetown Commission on Ethics and Standards of Practice in ADR, ‘Model Rule for the Lawyer as Third-Party Neutral’ (2002), . 226  Proposed Model Rule, Rule 4.3.5. 227  See para. 2.93 (discussing Proposed Model Rule 4.5.3(b) 8 (c)). 228  See, e.g., Codice Deontologico Forense (Ital.), (‘An attorney who serves as arbitrator shall behave in an ethical and proper manner and oversee that the proceedings are impartial and independent.’) (‘L’avvocato chiamato a svolgere la funzione di arbitro è tenuto ad improntare il proprio comportamento a probità e correttezza e a vigilare che il procedimento si svolga con imparzialità e indipendenza.’) (translation by author). 229  See paras 3.01–3.09.

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Chanticleer, the Fox, and Self-Regulation Opposition to such regulation, however, still remains and at times is quite emphatic.230 Opponents often cite the role of national ethical rules and professional discipline authorities. In many jurisdictions, these authorities are deemed to have exclusive jurisdiction to discipline attorneys. Moreover, in many jurisdictions, attorney ethical rules are generally regarded not only as mandatory, but also an essential corollary to attorney licensing at the national level. The conventional view is that only the entity that licenses an attorney, and ultimately holds the power to revoke that license, can regulate attorneys. 6.118 With a starting assumption that attorneys should be regulated exclusively in and by national

legal systems, sceptics of self-regulation in international arbitration also characterize attorney regulation as beyond the reach of internal private regulation by international arbitral mechanisms.231 Some argue that the formal limitations of arbitral jurisdiction mean that arbitral tribunals and institutions cannot be ‘regulators’ or ‘regulate’ attorney conduct. These first two lines of objection fit into a third, larger category of general resistance to promulgation of any ‘new regulations’. As analysed previously, these various objections are based on largely outdated concepts of regulation,232 outdated understandings of how attorneys are actually regulated in national systems,233 and how profound the conflicts and regulatory gaps are for counsel in international arbitration.234

6.119 Assessments of global self-regulation of national regulatory interests must be assessed against

national regulatory impotence.235 To this end, assessments of international arbitration must be assessed against the limitations produced by the ‘peculiar uncertainties’ of national courts236 and international regulation of arbitrators must be assessed against national alternatives. Similarly, the need for and potential effectiveness of counsel regulation within international arbitration must be assessed against the backdrop of regulatory gaps created by national regulation and inherent limitations of traditional national regulatory models. a.  National versus international regulation of attorneys

6.120 As examined in Chapters 1 and 3, it is inherently uncertain which ethical rules, if any,

apply to attorney conduct in international arbitration. As a formal matter, few national ethical codes indicate expressly whether they apply extraterritorially or in international arbitration.237 Empirical studies meanwhile verify that many attorneys themselves are often

230  See Schneider, ‘President’s Message’ 549; see also Daele, Challenge and Disqualification of Arbitrators in International Arbitration 269 (‘[A]‌s not everybody agrees on the need of a universal ethical code for arbitration counsel, it is far from sure that such a code will ever see light.’); Loretta Malintoppi, ‘How May Investment Tribunals Cope With and Sanction Guerrilla Tactics of the Parties/Their Counsel?’ 7 Transnat’l Disp. Mgmt., . (‘On balance, I personally am not convinced that there is a compelling need for a code of ethics for the “international bar”, or at least not for the time being. This brief overview has shown that investment tribunals can effectively counter improper tactics by counsel, through the imposition of awards for costs, drawing adverse inferences or simply admonishing counsel at the hearing or—even more publicly—in an award.’). 231  Brower and Schill ‘Regulating Counsel Conduct Before International Arbitral Tribunals’ (noting that authority to regulate attorneys ‘usually is viewed as inherently governmental and restricted to state institutions, such as national bar associations or state courts in whose jurisdiction counsel is qualified to practice’). 232  See paras 6.10–6.30. 233  See paras 6.31–6.43. 234  See Chapters 1 and 3. 235  See paras 6.45–6.57. 236  See paras 6.47–6.48. 237  V.V. Veeder, ‘The 2001 Goff Lecture—The Lawyer’s Duty to Arbitrate in Good Faith’, 18:4 Arb. Int. 431 (2002).

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Self-regulation in international arbitration uncertain if their home rules apply at all, or are supplemented by other rules,238 such as the rules of a ‘host’ jurisdiction where the arbitration is seated or where proceedings physically take place.239 Attorneys nevertheless generally presume and act as if the rules of the attorney’s ‘home’ jurisdiction, meaning where the attorney is licensed, govern. As surveyed in Chapter 3, meanwhile, applying the national ethical rules of attorneys’ home 6.121 jurisdictions may mean that attorneys in the same arbitral proceedings are abiding by significantly different and even directly conflicting ethical rules.240 Then there are specialized ethical issues that may be unique to international proceedings and thus ‘not easily amenable to resolution by reference to any single [national] code within the “home” or “host” jurisdiction’.241 The paradigmatic example, examined in detail in Chapter 3, is contrasting national regula- 6.122 tions regarding pre-testimonal communication with witnesses.242 Communication that is prohibited in many systems is ethically required by other systems. Other potential conflicts exist because of differing national obligations regarding the nature and extent of confidentiality obligations, conflicts of interest, obligations to produce documents, and obligations related to candor to the tribunal, among others.243 These conflicts can only be resolved by applying a single body of ethics.244 Even if substantive standards are harmonized or made uniform, enforcement would still 6.123 be limited to traditional enforcement in the jurisdiction where attorneys are licensed; no single national bar authority would have the power or competence to rule on the conduct of all attorneys within the same proceedings. As a result, enforcement would be uneven and unpredictable. This regulatory vacuum is probably still preferable to active efforts by national bar authori- 6.124 ties to regulate the conduct of counsel in international arbitral proceedings. As previewed in Chapter 3, international ethical standards are developing. As a practical matter, however, national bar authorities would have significant difficulties understanding, interpreting, and applying these new and unfamiliar ethical obligations developed for international arbitration. These sources might be in a foreign language and would address conduct under 238  IBA Task Force on Counsel Conduct in Arbitration Survey (Sept. 2010) (on file with author) (finding that only 63% of respondents believed that their home ethical rules apply in foreign-seated arbitrations). 239  See Robert W. Wachter, ‘Ethical Standards in International Arbitration: Considering Solutions to Level the Playing Field’, 24 Geo. J. Legal Ethics 1143, 1143 (2011) (‘There is no obvious answer to the question [of which ethical rules apply], and one or more sets of rules might apply, including the rules where the attorney is licensed, the foreign jurisdiction where the attorney works, the rules of the seat or arbitration, the rules adopted by the arbitral tribunal, or the rules where the conduct occurs.’). 240  See paras 3.19–3.23. 241  See Laurence Etherington and Rogert Lee, ‘Ethical Codes and Cultural Context: Ensuring Legal Ethics in the Global Law Firm’, 14 Ind. J. Global Legal Stud. 95, 97 (2007). 242  See paras 3.32–3.47. 243  See paras 3.32–3.83. 244  Some commentators have argued that this problem can be resolved by having the ethical rules of the arbitral seat apply and the courts or disciplinary authorities of the seat enforce those rules for attorneys in locally seated arbitration. Kristen Weisenberger, ‘Peace is Not the Absence of Conflict: A Response to Professor Rogers’s Article “Fit and Function in Legal Ethics”’, 25 Wisc. Int’l L.J, (2007) 89–128 (arguing that extant rules of conduct are adequate for the purpose of regulating international arbitrations, and a conflict-of-laws approach is the best option). As analysed in Chapter 1, instead of asserting regulatory authority, host jurisdictions around the world have almost uniformly exempted attorneys involved in international arbitrations from local ethical regulation. See Chapter 1, paras 1.77–1.87.

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Chanticleer, the Fox, and Self-Regulation unfamiliar procedures that likely involve opposing counsel and arbitrators from entirely different legal traditions. 6.125 The meaning of core ethical concepts like ‘truth’, ‘confidentiality’, ‘knowledge’, and ‘loy-

alty’ are hotly debated even within national legal systems. A simple linguistic translation of these terms across systems is difficult if not impossible. Relatedly, the culturally and contextually determined meaning of terms like ‘reasonable’ and ‘independence’ makes them equally difficult to translate linguistically. Adding to these conceptual problems, national bar authorities would also have difficulty assessing the factual underpinnings of alleged misconduct, which would most likely have occurred physically far away, and potentially in a foreign language. These types of institutional limitations are why Wilkins argues for contextualized enforcement as opposed to traditional disciplinary controls even in domestic contexts.245

6.126 In addition to purely practical challenges, there are also more constitutional challenges.

Regulatory authorities are not all-purpose machines into which a set of ethical rules can be input at one end and a disinterested disciplinary decision applying those rules is produced at the other end. Like the lawyers they administer, the individuals who staff regulatory authorities are products of a local legal culture.246 Their legal history, background, and training necessarily colour their perceptions about the propriety of attorney conduct and their interpretation of rules applied to such conduct.247 When filtered through national regulatory authorities, international and foreign legal ethical rules will be refracted through these national perspectives. For example, it is difficult to image that US disciplinary authorities would punish a US attorney for ‘improperly’ preparing a witness in a manner that is ethically permissible or even required under US ethical rules. It is similarly difficult to imagine a French bar association disciplining a French attorney for ‘unethically’ withholding documents that should have been disclosed in an international arbitration but would be considered confidential under French law, in a country that is historically hostile to the very notion of US-style document exchange.248

6.127 In addition to discounting the difficulties with national regulation of counsel conduct in

international arbitration, sceptics of regulation also fail to take into account existing trends in international arbitration. The next section examines several important precursors to the development of formal ethical regulation of attorneys within international arbitration before the subsequent section then examines trends toward more formalized substantive ethics and enforcement mechanism. Based on these trends, the final subsection concludes with proposals for future directions in attorney regulation.

  See paras 6.39–6.43.   There are international sections to State regulatory authorities, but they play no role in discipline. Their functions are generally limited to organizing research, networking opportunities, and symposia on issues of international law and practice. 247  cf.Wilkins, ‘Who Should Regulate’ 810–11 (noting that, since enforcement officials invariably exercise a certain amount of discretionary authority over the content of professional norms when they apply ethical rules in particular cases, ‘conferring enforcement authority is tantamount to empowering a particular set of actors to place their own interpretation on these ambiguous professional norms’). 248 France, Germany, The Netherlands, Norway, Belgium, Switzerland, Sweden, and Canada have all enacted blocking statutes that forbid its citizens from complying with certain US discovery requests. See William S. Dodge, ‘Extraterritoriality and Conflicts-of-Laws Theory: An Argument for Judicial Unilateralism’, 39 Harv. Int’l L.J. 101, 169 n. 357 (1998). 245 246

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Self-regulation in international arbitration b.  Precursors to ethical regulation Adopting a ‘can’t-wait’ mind set, even before any formal efforts to address this regulatory 6.128 uncertainty, a number of ad hoc efforts sought to address counsel ethics informally and indirectly. These earlier efforts demonstrate an implied consensus about the need for international regulation of counsel ethics within international arbitral procedures and institutions, and provide important precursors to future developments. Most specifically, the IBA Evidence Rules took up several issues relating to counsel ethics under the guise of promulgating evidentiary rules. For example, the 1999 version of the IBA Evidence Rules harmonized distinctly different national procedures, but also clarified in Article 4(3) that ‘[i]‌t shall not be improper for a Party, its officers, employees, legal advisors or other representatives to interview its witnesses or potential witnesses and to discuss their prospective testimony with them’.249 When Article 4(3) was revised in 2010, the drafters implicitly acknowledged that the previous rule regarding pre-testimonial communication left open a number of questions250 and responded by adding that parties could also ‘discuss their prospective testimony with [witnesses]’.251 The 2010 IBA Evidence Rules, meanwhile, built on and expanded on these indirect efforts to 6.129 regulate ethical conduct in arbitral proceedings. In Article 9(2)(b), the 2010 IBA Evidence Rules provide that arbitral tribunals have the power to determine which ethical rules are applicable and to enforce those rules by holding that evidence may be excluded as privileged under applicable rules.252 In recognition both of the need to resolve conflicts among national ethical rules and of the role of arbitral tribunals in providing that resolution, Article 9(3) outlines criteria that a tribunal should ‘take into account’ when it ‘consider[s]‌issues of . . . privilege under Article 9.2(b)’.253 In another acknowledgment of the necessity for arbtrators to rule on ethical issues, Article 6.130 9(6) provides that tribunals can take into account a party’s failure ‘to conduct itself in good faith in the taking of evidence’ in assessing ‘the costs of the arbitration, including costs arising out of or in connection with the taking of evidence’. Although they are designated as rules of evidence, the use of the terms ‘good faith’ and ‘improper’ reveals that these rules effectively address ethical issues. Notably, they were promulgated after the IBA Task Force on Counsel Ethics was established in 2008, but before it announced that it would be publishing its own Guidelines.254 Some of the truly unique and symbolic precursors to ethical regulation of counsel are ad 6.131 hoc efforts by individual lawyers to ‘promulgate’ international standards. For example, in connection with his International Council for Commercial Arbitration (ICCA) keynote

  IBA Evidence Rules, art. 4(3) (1999).   For a discussion of these ambiguities, see para. 3.36. 251  IBA Evidence Rules, art. 4(3) (2010). 252  IBA Evidence Rules, art. 9(2) (2010). 253  IBA Evidence Rules, art. 9(3) (2010). 254  The initial mandate of the Task Force was to determine ‘whether the lack of international guidelines and conflicting norms in counsel ethics undermines the fundamental protections of fairness and equality of treatment and the integrity of international arbitration proceedings’ and, if so, ‘what, if anything, the Counsel Ethics Task Force should propose to mitigate any such adverse impact’ . As of 2010, the task force had not made any public announcements regarding this mandate. The author was a member of the Task Force in its later years, but not prior to 2010. 249 250

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Chanticleer, the Fox, and Self-Regulation speech, Doak Bishop together with Margrete Stevens drafted in 2010 an ambitious proposed code of ethics for counsel in international arbitration.255 Similarly, Cyrus Benson drafted a ‘Checklist of Ethical Standards for Counsel in International Arbitration’, which is comprised of a series of proposed resolutions that parties and tribunals can agree to adopt, reject, or modify at the commencement of arbitral proceedings.256 These are not academic proposals. Both Bishop and Steven’s Code and Benson’s Checklist were created to provide usable resources that aimed to even the playing field by ensuring that counsel are abiding by the same ethical rules.257 In addition to these initiatives, some individual arbitrators now include in their initial procedural orders provisions that address specific ethical issues, such as procedures for retention of new counsel to avoid conflicts of interest with members of the tribunal. These improvisational, entrepreneurial efforts by individuals are illustrative of how international arbitration practitioners operate as what Dezalay and Garth referred to as ‘moral entrepreneurs’.258 Practitioners self-consciously seek to protect and strengthen the efficacy and legitimacy of interational arbitration, also in an effort to bolster indirectly their own credentials as knowledgeable participants and thought leaders. 6.132 In addition to direct, ad hoc efforts to harmonize conflicting national ethical rules, arbitral tri-

bunals rountinely rule on ethical issues during the ordinary course of arbitral proceedings.259 Arbitral tribunals impose costs and fees,260 and occasionally even express ‘sanctions’,261 based on perceptions of alleged misconduct by attorneys. Tribunals have also imposed what might be called ‘reputational sanctions’,262 excluded evidence or drawn adverse inferences,263 issued interim orders, and on occasion even dismissed parties’ claims.264 It has also been reported

255   Doak Bishop and Margrete Stevens, ‘Advocacy and Ethics in International Arbitration: International Code of Ethics for Lawyers Practicing Before International Arbitral Tribunals’, in Arbitration Advocacy in Changing Times (ICCA Congress Series No. 15, Rio, 2010), 408. 256   Benson, ‘Can Professional Ethics Wait?’ 88–94. 257   Benson, ‘Can Professional Ethics Wait?’ 89. 258   Dezalay and Garth, Dealing in Virtue. 259   For a thoughtful overview of the tools available to arbitrators, see Günther J. Horvath, ‘Guerrilla Tactics in Arbitration, an Ethical Battle: Is There Need for a Universal Code of Ethics?’ in Christian Klausegger et al. (eds.), 2011 Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 297, 302–310. 260  Günther J. Horvath, ‘Guerrilla Tactics in Arbitration, an Ethical Battle: Is There Need for a Universal Code of Ethics?’ in Christian Klausegger et al. (eds.), 2011 Austrian Yearbook on International Arbitration (Manz’sche Verlags- und Universitätsbuchhandlung, 2011) 297, 308–309. 261  See Gray v Smith Barney, Inc., NASD 95-01185 (17 March 1997) (respondents were sanctioned for failure to produce a witness) (cited in Michele R. Fron and Kelly M. McIntyre, ‘Sanctions in Arbitration’, 1264 PLI/Corp 1143, 1157 (2001)). 262  See EDF (Servs.) Ltd v Romania, ICSID Case No ARB/05/13, Procedural Order No. 2, 30 May 2008, para. 50 (tribunal admonishing parties (and implicitly counsel) for conduct). 263  See EDF (Services) Limited v Romania, ICSID Case No ARB/05/13, Procedural Order No. 3, 29 Aug. 2008, paras 37–8, 38 (finding evidence inadmissible); Libananco Holdings Co. v Turkey, ICSID Case No. ARB/06/8, Decision on Preliminary Issues, 23 June 2008 (excluding evidence); Teixeira v Hunter Int’l Secs., NASD 96–02581 (1 May 1997) (drawing an adverse inference regarding documents respondent was ordered to and refused to produce). 264  See In re LOP Capital Markets Inc. v Sun Coast Capital Grp., NASD 97–04049 (11 Aug. 1998) (sanctioning claimant’s numerous discovery violations by dismissing their claim with prejudice and barring the claimant from presenting any matter, argument, or defence to the counterclaim at the hearing. In addition, third-party respondents were barred from asserting any defence in the matter, although the award does not indicate the basis for this sanction); Parsons v Kensington Wells, NASD 96–05310 (25 June 1998) (defences stricken due to failure to comply with discovery orders); Prime Capital Services, Inc. v Bram & Procopio, NASD 97-01910 (Mar. 1998) (claim dismissed for failure to produce documents, obey discovery orders, and appear at a scheduled

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Self-regulation in international arbitration that some individual arbitrators specify in initial procedural orders that the tribunal has the power to preclude conflicted or disruptive counsel from arbitral proceedings. Informal sources and techniques have emerged in response to a perceived need for greater 6.133 ethical guidance and regulation, and have been an important gap-filler. The problem with most informal methods for enforcing ethics, however, is that they are imprecise. In the absence of formally articulated ethics, arbitrators rely on their own perceptions and often undisclosed assessments of attorney conduct. The sanctions they impose, therefore, are often for unarticulated violations of unknown rules and without any opportunity for counsel or their clients to be heard. In addition, these indirect techniques for responding to perceived ethical misconduct may 6.134 sanction a party when the misconduct belongs to the attorney. Clients may be made to pay substantive awards produced by negative inferences, and sanctions, costs, and fees, even if the misconduct that produced them belongs wholly to the attorney.265 Some opponents of ethical reforms argue that, since attorneys are agents of parties, it is reasonable to impute to parties consequences for the misconduct of their counsel. While this assumption may be true in some cases, it is not in all cases. In Pope & Talbot v Canada,266 counsel improperly facilitated the publication of confiden- 6.135 tial information.267 The tribunal deemed counsel’s conduct to involve either an ‘intentional violation’ or ‘reckless disregard’, that was ‘highly reprehensible’,268 and ‘not acceptable’.269 Apparently acting on a belief that it did not have the power to directly sanction counsel, however, the tribunal directed the offending counsel’s client to pay costs (US$10,000) for the motion on the issue.270 In so directing, the tribunal ‘expressed the wish’ that counsel would ‘voluntarily personally assume those costs’271 and ‘assumed’ that counsel would make its decision public.272 Pope & Talbot’s finding that counsel, not the party, were responsible for misconduct is 6.136 not sui generis. Irresponsible counsel can take positions, even in advocacy settings, that betray clients’ best interests,273 though ostensibly asserted on a client’s behalf. In domestic contexts, client monitoring of attorney conduct can reduce such risks. In international arbitration, however, even from the client’s perspective, conflicting national ethical rules and resulting ambiguities make it exceedingly difficult to monitor and detect misconduct by counsel.

hearing); Everen Securities v Collop, NASD 96-01295 (21 March 1997) (barring respondent from presenting any defence or other matter at the hearing on the basis that he failed to file an answer). These are domestic US cases. 265  One of the clear examples of tribunal convinced that misconduct belonged to an attorney is the NAFTA decision in Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000. 266  See Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000. 267  See Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000, 1–4. 268  See Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000, 6 and 8. 269  See Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000, 7. 270  See Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000, 11. 271  See Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000, 12. 272  See Pope & Talbot, Inc. v Canada, UNCITRAL/NAFTA, Decision, 27 Sept. 2000, 13. 273  This potential may increase with the increasing participation of third-party funders. As described in Chapter 5, funders often collaborate directly with law firms and their participation can raise a host of ethical issues for attorneys.

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Chanticleer, the Fox, and Self-Regulation c.  Developing substantive standards 6.137 Against the backdrop of existing precursors, development of substantive ethical standards

for counsel is already well underway. Just as with development of substantive ethical obligations for arbitrators, these standards are being developed by private, international entities. As explored in Chapter 3, the most important and significant effort to date has been the IBA Task Force’s publication in 2013 of Guidelines for Party Representation in International Arbitration.274

6.138 To become binding on the parties, the Guidelines must be accepted in whole or in part by the

parties or imposed by an arbitral tribunal.275 As analysed in Chapter 3, the IBA Guidelines for Party Representatives attempt to resolve many of the areas in which national ethical rules conflict, such as communication with witnesses276 and the extent of permissible communications with arbitrators.277 The Guidelines also address issues relating to attorney obligations in light of document exchange procedures278 and submissions to the tribunal.279

6.139 The Guidelines are not without their detractors, however. As indicated at the beginning of this

chapter, some critics generally oppose development of new rules or guidelines.280 Others are critical of asserted inconsistencies between the Guidelines and the IBA Evidence Rules, particularly how the Guidelines appear (according to critics) to expand dramatically the scope of documents that can be sought in document exchanges.281 This latter concern is echoed by some civil-law-trained lawyers, who complain that some of the provisions in the IBA Guidelines are decidedly common-law oriented, as opposed to an established harmonized or neutral ethical standard. The nature of these latter concerns is addressed in Chapter 7.282

6.140 While debate continues about particular provisions, the ultimate success of the IBA

Guidelines for Party Representatives will be determined not by an abstract assessment of their content, but by how widely they are accepted as legitimate, as well as used in arbitral proceedings. In this assessment, the Guidelines will not be the only product. Instead, it seems a vibrant marketplace for international standards may be developing, as previewed by Bishop and Steven’s code and Benson’s Checklist. As this book is going to press, the new LCIA Arbitration Rules are being revised to include what is being called a ‘regulatory scheme for counsel conduct’.283 In addition to rules imposed directly on counsel, the proposed revisions to the LCIA Rules would include two rules. The first would oblige parties to ensure that their

274  The author served as a member of the Task Force, though joined a few years after it had initially been constituted. In light of obligations as a member of the Task Force, commentary on the substantive content of the Task Force’s Guidelines is necessarily limited. 275  Even when agreed to, however, the Preamble of the Guidelines indicates that they are not intended to displace mandatory national ethical rules or the role of national regulatory authorities. 276  See IBA Guidelines for Party Representatives 18–25. 277  See IBA Guidelines for Party Representatives 7. 278  See IBA Guidelines for Party Representatives 12–17. 279  See IBA Guidelines for Party Representatives 9–10. 280  Michael Schneider, ‘President’s Message’, 497. 281  Schneider, ‘President’s Message’ 389, (‘[U]‌nder the guise of regulating party representation, this “guideline” expands the scope of the obligations of the parties themselves and introduces an obligation of document preservation (or “litigation hold”)!’). 282  See paras 7.33–7.65. 283  Doug Jones, ‘How to maintain a fair and just process when counsel, clients and co-arbitrators appear to be conspiring against you’, 13, .

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Self-regulation in international arbitration legal representatives comply with ethical guidelines to be contained in a new Annex to the LCIA Rules. The second rule would empower the arbitral tribunal to exclude counsel from all or part of arbitral proceedings who are determined to have engaged in serious and persistant misconduct from the arbitration.284 Notably, the proposed LCIA Arbitration Rules would empower tribunals to exclude counsel by virtue of the parties’ assent to that power. As such, they do not attempt to extend tribunal powers over attorneys directly. Calling the LCIA’s effort ‘an astounding innovation in the area’,285 some commentators are 6.141 already speculating that the LCIA’s initiative may be ‘positive inspiration for other arbitral institutions to set up their own ethical rules or guidelines regarding the parties’ representatives’ conduct’ such that ‘the LCIA may not be the last institution’.286 Given the seemingly endless conferences, papers, blog posts, and debates on these topics, particularly in light of these new developments, the march toward international ethical regulation for counsel seems irreversible, even if questions still remain about the content and enforcement of those rules. Several questions remain about content. First, culturally determined, value-ridden dif- 6.142 ferences of opinion remain about what is proper and improper. Chapter 7 proposes the Functional Thesis, which will provide a more neutral approach than direct negotiations in determining the content of international ethics. Many other questions remain regarding the relationship between international ethical obligations and attorneys’ presumably continuing national ethical obligations. These latter issues are intertwined with issues of how international ethical rules are enforced in international arbitration. d.  Developing enforcement mechanisms One principal reason why regulation of arbitrators is so effective is that the standards defin- 6.143 ing their impartiality obligations are enforced in context. Arbitral institutions are frontline regulators for arbitrator ethics because they have the greatest institutional competence and the greatest incentives to perform the necessary regulatory functions. For enforcement of counsel ethics, arbitral institutions do not enjoy a similar situational advantage. Instead, arbitral tribunals are the entities that have the greatest institutional competence and a direct, even if not perfectly aligned, incentive to regulate.287 Arbitral tribunals are uniquely positioned, particularly in contrast to national authorities, 6.144 to interpret applicable ethical rules in cross-cultural contexts and against the backdrop of international arbitral procedures in which the relevant conduct occurs. During the ordinary course of proceedings, arbitrators have an opportunity to observe and evaluate an attorney’s conduct in context. Arbitrators also have a stake in the integrity of the process. Arbitrators develop reputa- 6.145 tions in part based on their ability to control proceedings and render fair and expedient results.288 These reputations will affect whether arbitrators are selected to serve on future

  Jones, ‘How to maintain a fair and just process’ 17 (quoting draft texts of proposed LCIA Rules 18.5 and 18.6).   Jones, ‘How to maintain a fair and just process’ 13. 286  Jones, ‘How to maintain a fair and just process’ 18. 287  See paras 6.120–6.127. 288  Dezalay and Garth, Dealing in Virtue 159 (noting the importance of an elite reputation to international commercial arbitrators); cf. Eric A. Posner, ‘Arbitration and the Harmonization of International Commercial Law: A Defense of Mitsubishi’, 39 Va. J. Int’l L. 647, 668 (1999) (reviewing research that demonstrates that arbitrators are deeply concerned about their professional reputations). 284

285

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Chanticleer, the Fox, and Self-Regulation panels, which means arbitrators have an incentive to protect the integrity of proceedings against attorney misconduct. 6.146 One potential limitation on the proper function of tribunal incentives to regulate counsel is

that, as described in Chapter 2, leading law firms play a decisive role in arbitrator ­selection.289 As a result, there is a risk that arbitrators may be unduly reluctant to sanction counsel from whom they might hope to secure future appointments. This risk is compounded by concerns that arbitral tribunals may be more likely to sanction arbitration ‘outsiders’ from smaller firms, rather than big players from leading firms. Even in the US court system, several studies have demonstrated that bar authorities and courts disproportionately sanction smaller law firms and solo practitioners.290 In international arbitration, the risk may be heightened since newcomers are less likely to be familiar with established practices and international rules.291 In addition to these questions about institutional competence of arbitral tribunals, questions also remain regarding whether and to what extent they may exercise this power. i.  Formal tribunal powers

6.147 Many objections to arbitral tribunals enforcing counsel ethics directly against counsel

focus on the nature of arbitral jurisdiction and power. There are two distinct types of power that are contemplated—the power to disqualify or exclude counsel, and the power to sanction counsel. For both these categories, there are three distinct theories under which an arbitral tribunal might exercise such powers to rule on attorney conduct: inherent powers, implied powers, and contractual powers. The first two are occasionally, though not universally, endorsed by some public international and investment law tribunals,292 and undoubtedly remain important for public international tribunals.293 The third is the contractual approach, which was foreshadowed in the earlier-described precursors that are already being embraced by recent efforts to develop international ethics. The contractual approach is also the approach most consistent with modern governance theories and models of self-regulation.

6.148 Even in jurisdictions that are traditionally very deferential to arbitration, like the United

States, judicial decisions about tribunal powers are all over the proverbial map, both in terms of outcomes and in terms of justifications for those outcomes. Disqualification presents an

  See paras 2.24–2.36.   Mark Hansen, ‘Picking on the Little Guy: Perception Lingers that Discipline Falls Hardest on Solos and Small Firms’, A.B.A. J., March 2003, 30, 30–32 (explaining studies from California, New Mexico, Virginia, and Oregon show higher rates of sanctions imposed against solo and small firm practitioners); Hal R. Lieberman, ‘How to Avoid Common Ethics Problems: Small Firms and Solos Are Often Subject to Disciplinary Complaints and Malpractice Claims’, N.Y.L.J., 28 Oct.2002, S4. 291  See Catherine A. Rogers, ‘When the Bad Guys Are Wearing White Hats’, 1 Stanford J. Complex Lit. 487 (2013) (analysing why international practice holds potential ethical traps for smaller law firms new to international practice). 292  See, e.g., Rompetrol Group NV v Romania, ICSID Case No. ARB/06/3, Decision of the Tribunal on the Participation of a Counsel, 14 Jan. 2010; Fraport Ag Frankfurt Airport Services Worldwide v Republic of The Philippines, ICSID Case No. ARB/03/25, Annulment Proceeding, Decision on Application for Disqualification of Counsel, 18 Sept. 2008; Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling Regarding the Participation of David Mildon QC in Further Stages of the Proceedings, 6 May 2008. 293  For a thoughtful analysis of these theories, and how they are often conflated and confused with each other, see Arman Sarvarian, Professional Ethics at the International Bar (Oxford University Press, 2013). 289 290

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Self-regulation in international arbitration easier context because, even if a tribunal decision affects the conduct of counsel, it can be directed at a party, as contemplated by the new LCIA Arbitration Rules. Even if disqualification is the easier context, there is still significant judicial disagreement. 6.149 For example, in the United States, those courts that have permitted arbitrators to rule on motions to disqualify counsel have done so on the ground that such rulings necessarily implicate the merits and procedures of the underlying dispute, which the arbitrators were better situated to evaluate.294 One court even went so far as to suggest that court intervention ‘would show disrespect toward the Arbitration panel, which has the broad authority to address these issues in the first instance’ and would run contrary to state and national policies in favour of arbitration.295 Other courts reason that deference is essential to the proper functioning of arbitration and an avoidance of judicial intrusion on arbitral proceedings.296 On the other hand, several other US courts have rejected the idea that arbitrators have the 6.150 power to decide the issue of counsel disqualification. The line of cases most often cited for this proposition come out of New York, and can be traced back to an oft-cited, one-paragraph opinion of the court of first instance (somewhat misleadingly called the ‘Supreme Court’) of New York in Bidermann Indus. Licensing, Inc. v Avmar N.V.297 Cases since Bidermann have often provided more thoughtful and thorough analyses, and hence constitute a significant body of authority weighing against the existence of such power.298

294   See SOC-SMG, Inc. v Day & Zimmermann, Inc., 5375-VCS, 2010 WL 3634204 (Del. Ch. 15 Sept. 2010), *2; Concat LP v Unilever, PLC, 350 F. Supp. 2d 796, 816 (N.D. Cal. 2004); Croushore v Buchanan Ingersoll P.C., 32 Pa. D. & C.4th 142, 149 (Pa. Com. Pl. 1996); Cook Chocolate Co. v Salomon Inc., 87 CIV. 5705 (RWS), 1988 WL 120464 (S.D.N.Y. 28 Oct. 1988); Wurttembergisch Fire Ins. Co. v Republic Ins. Co., 86 CIV. 2696 CSH, 1986 WL 7773 (S.D.N.Y. 9 July 1986). 295   SOC-SMG, *3. 296   See Canaan Venture Partners, L.P. v Salzman, CV 950144056S, 1996 WL 62658 (Conn. Super. Ct. 28 Jan. 1996) (unpublished opinion) (sending issue to arbitration since there was no ‘positive assurance’ that the issue was outside the scope of the arbitration agreement and that ‘[d]‌oubts should be resolved in favor of arbitration’); Concat LP v Unilever, PLC, 350 F. Supp. 2d 796, 816 (N.D. Cal. 2004) (ruling on a disqualification motion regarding parallel litigation, but concluding that its ruling was not binding in the arbitration proceedings); Concat LP v Unilever, PLC, 350 F. Supp. 2d 796, 816 (N.D. Cal. 2004); Wurttembergisch Fire Ins. Co. v Republic Ins. Co., 86 CIV. 2696 CSH, 1986 WL 7773 (S.D.N.Y. July 9, 1986) (‘While I have the authority to disqualify the present defendants’ counsel in this [court] litigation . . . any order doing so would have only advisory effect upon the arbitrators. Courts do not give advisory opinions. It is for the arbitrators to control their internal procedures, subject only to the very limited post-award remedies conferred by § 10 of the [Federal Arbitration] Act.’). 297  173 A.D.2d 401, 402 (N.Y.App.Div.1991) (‘Issues of attorney disqualification . . . involve interpretation and application of the Code of Professional Responsibility and Disciplinary Rules . . . and cannot be left to the determination of arbitrators . . .’); see also Matter of Erdheim v Selkowe, 51 A.D.2d 705, 705 (holding that the power to censure attorneys ‘as members of the Bar is reserved to the Appellate Division of the Supreme Court in each department’). Matter of Abrams, 62 N.Y.2d 183, 196, 476 N.Y.S.2d 494, 465 N.E.2d 1; S & S Hotel Ventures v 777 S.H. Corp., 69 N.Y.2d 437, 443, 515 N.Y.S.2d 735, 508 N.E.2d 647). 298  Munich Re America Inc. v Ace Property & Casualty Co., 500 F.Supp.2d 272, 275 (S.D.N.Y.2007) (determining that ‘possible attorney disqualification—is not capable of settlement by arbitration’); In Matter of Arbitration Between R3 Aerospace Inc., Marshall of Cambridge Aerospace Ltd, 927 F.Supp. 121, 123 (S.D.N.Y.1996) (citing Bidermann Indus. Licensing Inc. v Avmar N.V., 173 A.D.2d 401 (1991)) (‘The subject matter of the dispute in this case—i.e., possible attorney disqualification—is not capable of settlement by arbitration.’); Croushore v Buchanan Ingersoll P.C., 1996 WL 932086, 1996 Pa. Dist. & Cnty. Dec. LEXIS 212 (Pa.Com.Pl.1996) (‘[B]‌y agreeing to submit a dispute to arbitration, a party has not given up its right to seek judicial review of its claims that a former attorney or former law firm is breaching fiduciary duties owed to the party, as a former client.’); Erdheim v Selkowe, 51 A.D.2d 705, 705 (N.Y.App.Div.1976) (finding that arbitrators lacked the ability to censure attorneys and that this power ‘is reserved to the Appellate Division of the Supreme Court in each department’).

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Chanticleer, the Fox, and Self-Regulation 6.151 At the international level, numerous cases have also addressed questions about tribunals’

inherent and implied powers to issue sanctions or disqualify counsel. Some older commercial arbitration cases reached inconsistent conclusions about their powers. One ICC tribunal concluded that it lacked jurisdiction to rule on a request to disqualify counsel. The tribunal characterized the claim as a dispute between claimant and counsel, which it concluded was not within the scope of the arbitration agreement. Even if had been within the scope, however, the tribunal found that the ‘dispute’ would not be arbitrable as a matter of law.299 Notably, the tribunal also expressed doubts about whether the ethical code of a domestic bar association applied ‘in the context of an international arbitral proceeding’.300 By contrast, another ICC tribunal assumed its jurisdiction to decide the issue of counsel disqualification, but in assessing the substance of the challenge, it ultimately denied the request on the merits.301

6.152 Arbitrators’ inherent authority is especially pertinent in treaty-based arbitrations, where

arbitrators ‘hold a public office in view of the host State’s consent by sovereign act’.302 Not surprisingly, a number of investment tribunals have ruled on issues of counsel ethics. The most prominent, perhaps even watershed, case is Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia.303 In that case, HEP requested the tribunal exclude one of Slovenia’s counsel from further proceedings when it was disclosed for the first time shortly before the hearings that Slovenia’s counsel was an English barrister who was a member of the same barristers’ chambers as the tribunal’s President.304 The tribunal ultimately ruled that the counsel in question could not participate further as counsel in the case.305

6.153 The tribunal grounded its decision on the immutability of properly constituted tribunals

established under Article 56(1) of the ICSID Convention and procedural powers granted under Article 44 of the Convention (authorizing the tribunal to decide ‘any question of procedure’ not expressly dealt with in the Convention, or the ICSID Arbitration Rules, or ‘any rule agreed by the parties’).306 Additionally, the tribunal reasoned that international courts have an ‘inherent power’ existing independent of any statutory reference to deal with any issues necessary for the conduct of matters falling within its jurisdiction.307

299   See Partial Award of 1997 in ICC Case 8897 (unpublished), in G. Naón, Choice-of-Law Problems in International Commercial Arbitration (Collected Courses of the Hague Academy of International Law, Martinus Nijhoff Publishers, 2001) 157–9. 300  See Partial Award of 1997 in ICC Case 8897 (unpublished), in G. Naón, Choice-of-Law Problems in International Commercial Arbitration (Collected Courses of the Hague Academy of International Law, Martinus Nijhoff Publishers, 2001) 157–59. 301  Partial Award of 2000 in ICC Case 10776 (unpublished), in G. Naón, Choice-of-Law Problems in International Commercial Arbitration (Collected Courses of the Hague Academy of International Law, Martinus Nijhoff Publishers, 2001) 159–60. The alleged conflict was based on the fact that counsel had participated in negotiation and drafting of the agreement giving rise to the dispute and could be called as a witness, and because counsel sat on claimant’s board of directors, he would have a pecuniary interest in the case and would be unable to deal with confidential information. 302  See Brower and Schill, ‘Regulating Counsel Conduct Before International Arbitral Tribunals’ 496. 303  See Hrvatska Elektroprivreda d.  d. [HEP] v The Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling Regarding the Participation of David Mildon QC in Further Stages of the Proceedings, 6 May 2008. 304  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, para. 12. 305  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, para. 34. 306  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia. 307  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, para. 33. Notably, the tribunal included pre-eminent arbitrators, including Charles Brower, David Williams QC, and Jan Paulsson, who has been on the forefront of arbitrator and counsel ethics.

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Self-regulation in international arbitration Another tribunal, in Rompetrol Group NV v Romania,308 similarly decided that it had an 6.154 inherent power to disqualify counsel, but determined that such power would only be exercised ‘rarely, and then only in compelling circumstances’ based on an overriding and undeniable need to safeguard the essential integrity of the entire arbitral process.309 Also, in Fraport Ag Frankfurt Airport Services Worldwide v The Philippines,310 an ICSID Annulment Committee looked to Article 44 of the ICSID Convention and what it called a ‘functional justitfication’ to decide that it has the ‘power and obligation to make sure that generally recognized principles relating to conflict of interest and the protection of the confidentiality of information imparted by clients to their lawyers are complied with’.311 Even if it asserted that it had the power, the tribunal determined that there was no clear evidence that counsel received confidential information and hence there was no real risk of prejudice to the proceedings.312 These various precedents reveal not only conflicting outcomes, but a divided conceptual- 6.155 ization about the regulatory role of arbitral tribunals independent of their outcomes. As analysed in greater detail in Chapter 9, conceptions of arbitrators’ role is often characterized in binary terms, as either ‘justice providers’ who substitute for judges or as mere ‘service providers’ who simply enforce parties’ contractual agreements. The conception of tribunals as service providers is most vivid in ICC Case 8897. There, the 6.156 tribunal held that the issue regarding counsel ethics, even if within the scope of the arbitration agreement, would be non-arbitral because it required adjudicating the ‘criminal consequences of alleged advocate misconduct’.313 The conception of tribunals as justice-providers is most clearly illustrated in the reasoning of HEP v Slovenia, which relied on its quasi-public status and finding of judicial-like inherent and implied power to conclude that regulating the professional conduct of counsel is part of that function.314 In Fraport, the tribunal attempted to stake out an uncomfortable middle ground. It con- 6.157 cluded that it had the power to disqualify or exclude counsel, but that it lacked ‘deontological responsibilities’, and had ‘no power to rule on an allegation of misconduct under any such professional rules as may apply’ and instead limited its power to ‘the fair conduct of the

308  See Rompetrol Group NV v Romania, ICSID Case No. ARB/06/3, Decision of the Tribunal on the Participation of a Counsel, 14 Jan. 2010. 309  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia. 310  See Fraport Ag Frankfurt Airport Services Worldwide v Republic of The Philippines, ICSID Case No. ARB/03/25, Annulment Proceeding, Decision on Application for Disqualification of Counsel, 18 Sept. 2008, para. 41. 311  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, para. 37. 312  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, paras 54–5. Another recent application to disqualify counsel that arose in Highbury International AVV & Ramstein Trading Inc. v Bolivarian Republic of Venezuela was dismissed, but grounds for the challenge and dismissal are unavailable. See Highbury International AVV v Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/1, Decision on Disqualification of Counsel, 10 Aug. 2011, para. 189, in Daele (ed.), Challenge and Disqualification of Arbitrators in International Arbitration 60–87; S. Perry, ‘ICSID Panel Declines to Disqualify Counsel’, Global Arb Rev., (15 Aug. 2011). 313  See Partial Award of 1997 in ICC Case 8897 (unpublished), in G. Naón, Choice-of-Law Problems in International Commercial Arbitration (Collected Courses of the Hague Academy of International Law, Martinus Nijhoff Publishers, 2001) 157–9. 314  See Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling Regarding the Participation of David Mildon QC in Further Stages of the Proceedings, 23 May 2008.

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Chanticleer, the Fox, and Self-Regulation proceedings before it’.315 On the one hand, this reasoning acknowledges a necessity and appropriateness for arbitral tribunals to enforce international ethics (even if the tribunal characterized them only as ‘generally recognized principles relating to conflict of interest’). On the other hand, it highlights several residual problems that will have to be addressed if international arbitration is to move toward an effective model of self-regulation for counsel conduct including the relationship between national ethical rules and international arbitration’s international ethical obligations. 6.158 Even if awards of costs and fees are a typical tribunal response to attorney misconduct,

re-targetting monetary sanctions at the offending counsel presents unique jurisdictional problems. While an order to disqualify counsel can arguably be directed at the parties to the arbitration agreement, sanctions would be directed at attorneys who are not parties to the agreement. Here again the few available authories are split, with most cases finding that arbitrators lack jurisdiction over attorneys. A few cases have, however, been willing to find arbitral jurisdiction. Their reasoning is based on powers implied in arbitral rules or inherent in the nature of arbitral adjudication,316 similar to the reasoning discussed earlier regarding disqualification in investment arbitration cases. ii.  Fully operational self-regulation of counsel

6.159 One recurring theme with respect to international regulation of counsel in international

arbitration is its relationship with national ethical rules and professional regulation. The IBA Guidelines on Party Representatives and most tribunal decisions regarding arbitrators’ powers to rule on counsel ethics presume that national ethical rules and enforcement mechanisms do and should still apply in full force in international arbitration. For a fully functioning model of ethical regulation in international arbitration, what is needed is instead something closer to Braithwaite’s model of ‘enforced self-regulation’ that has proven so successful for international arbitrators.317 It would be premature and presumptuous, particularly given the breakneck pace at which counsel ethics are evolving, to dictate here a specific blueprint for this goal. There are, however, a few prescriptions that seem necessary and inevitable.

6.160 First, there is a need to more clearly determine when and how international ethics displace, as

opposed to merely supplement, national ethical rules. While many sceptics predict national bar authorities would not make necessary concessions, there seems to be much evidence to the contrary. For example, in the United States, Model Rule 8.5 allows international tribunals to have their own rules, such as the International Criminal Tribunal for the former Yugoslavia (ICTY) and the International Criminal Court, and US bar rules allow attorneys to abide by those rules instead of the rules of their home jurisdiction.318 In addition, with

315  See Hrvatska Elektroprivreda d.  d. [HEP] v The Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling Regarding the Participation of David Mildon QC in Further Stages of the Proceedings, 6 May 2008, paras 38–39. 316  See Polin v. Kellwood Co., 103 F. Supp. 2d 238 (S.D.N.Y. 2000), aff’d, 34 F. App’x 406 (2d Cir. 2002) (reasoning that the applicable arbitral rules gave the panel broad power to grant any remedy that would have been available under a court’s inherent power); Bak v MCL Fin. Group, Inc., 88 Cal. Rptr. 3d 800, 806 (Cal. Ct. App. 2009) (finding that, although counsel was not party to the arbitration agreement, by voluntarily appearing for defendants in the arbitration proceedings and in responding to plaintiffs’ claim, counsel subjected himself to the jurisdiction of the arbitration panel and was subject to its rulings, including monetary sanctions). 317  See paras 6.22–6.26. 318  Specifically Rule 8.5 provides that ‘for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits [shall apply], unless the rules of the tribunal provide otherwise‌’, Model Rules of Prof ’l Conduct R. 8.5 (2002).

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Self-regulation in international arbitration respect to international arbitration, as examined in Chapter 3, Swiss, Belgian, and French bar authorities have created special exceptions for international tribunals to allow locally licensed attorneys to engage in pre-testimonial communication with witnesses that would otherwise be prohibited in domestic litigation or arbitration.319 In a similar vein, bar authorities in the arbitral seat arguably could assert regulatory power over foreign attorneys appearing in locally seated arbitrations. As examined in Chapter 1, however, jurisdictions have almost uniformly created special exemptions in an effort to attract international arbitration business.320 The willingness of national bar authorities to grant exemptions from national rules dem- 6.161 onstrates that international arbitration practitioners are effective at lobbying their local bar authorities to relinquish regulatory authority. The ultimate aim of such lobbying should not be a complete relinquishment of national ethical rules, but instead choice-of-law rules that allow application of international arbitration ethics to counsel appearing in international arbitral proceedings. To be effective at creating an even playing field in international arbitration, a choice-of-law 6.162 rule must be adopted by all relevant national bar authorities. The best way to approach this effort is through an international ‘model’ choice-of-law rule that can be adopted by national bar authorities.321 The drafting of such a rule will require serious analysis and delineation of which rules or categories of duties get displaced, as well as when, and how.322 The process of drafting and implementing such rules, however, will help affirm national support for primary regulation to be located with international arbitral tribunals. Another innovation needed to ensure fully functioning attorney self-regulation, particu- 6.163 larly if national bar authorities cede application of their national ethical rules, is to affirm arbitral tribunal powers to function as primary regulators. To this end, attorneys should be personally and expressly subject to tribunal power. Momentum is already gaining regarding tribunal powers to exclude or disqualify counsel. That momentum is manifest in assertions by tribunals of their inherent or implied power.323 Even more recently that momentum is manifested by proposed revisions by the LCIA that would embed such power in the arbitral rules, and consequently the parties’ agreement,324 and by ad hoc efforts by individual tribunals to create such powers by including them in terms of reference and initial procedural orders.325 The advantage of these latter mechanisms is that they establish contractual forms of arbitral jurisdiction that are less likely to encounter opposition by national courts or authorities. A similar mechanism could be used to make attorneys directly and personally subject to arbitral jurisdiction.

  See paras 1.78–1.84.   See paras 3.39–3.47. 321  Catherine A. Rogers, ‘Cross-Border Bankruptcy as a Model for Regulation of International Attorneys’, in Making Transnational Law Work in a Global Economy: Essays in Honour of Detlev Vagts (Cambridge University Press, 2010). 322  For an extended analysis of the challenges and perils of ethical choice-of-law rules, and how the UK Solicitor’s Regulatory Authority’s rule-by-rule approach is superior to the approach in the US Model Rules, see Catherine A. Rogers, ‘Lawyers Without Borders’, 30 U. Penn. Int’l L. Rev. 1035 (2009). 323  See paras 6.143–6.158. 324  See paras 6.140–6.142. 325  See para. 6.158. 319 320

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Chanticleer, the Fox, and Self-Regulation 6.164 In the ordinary course of events, attorneys generally sign terms of reference or initial procedural

orders. These signatures are a form of assent, but expressed by attorneys in their representative, not individual, capacity. There is some debate about whether the terms of reference constitute an amendment to the arbitration agreement or a new superseding agreement.326 Whatever the status, however, signature by attorneys in their personal capacity could join them, for limited purposes, to the arbitration agreement.

6.165 Ultimately, having attorneys sign on to the arbitration agreement would allow tribunals to issue

‘sanction awards’ when severe misconduct was found. Such sanction awards would be enforceable like other Convention awards, and would provide a formal means for international arbitrators to issue definitive assessments of attorney conduct with real remedies attached. Sanction awards would internalize enforcement power within international arbitration’s procedures, but would subject that power to ordinary award-review or bar-review mechanisms. It would, in other words, achieve enforced self-regulation of attorneys in international arbitration.

C. Conclusion 6.166 While ‘regulation’ is a term that is generally resisted, self-regulation in international arbitra-

tion is a healthy way to preserve existing structures and strengthen the regime. The legitimacy of international arbitration is predicated in substantial part on the integrity and professional conduct of its founders and of its modern custodians—the arbitrators, counsel, experts, and administrators of arbitral institutions who manage and decide the disputes. These participants build and sustain the legal frameworks and procedures on which the legitimacy of international arbitration is founded. Clearer ethical norms and a reliable enforcement regime are essential to that function and have evolved organically in international arbitration.

6.167 Apart from avoiding potential risks of external regulation, the regulation of counsel in inter-

national arbitration presents an important opportunity. Just as with arbitrator ethics, effective counsel regulation will help to facilitate the influx of an increasingly large diversity spectrum of participants.

6.168 The evolution of internal regulation of international arbitrators, and subsequently attorneys,

in international arbitration also holds some clues about the future of regulation of experts and third-party funders. For example, as with the evolution of ethics for counsel, procedural innovations regarding experts have already been introduced, most specifically through recent revisions to the IBA Evidence Rules. These efforts are already attempting to frame their ethical obligations. As examined in Chapter 4, some of these rules miss their mark and may need further revision, but they signal an intuition that some clearer regulation is needed.

6.169 Efforts to regulate third-party funders, meanwhile, may follow a similar approach. Just arbi-

trators were a first priority for ethical self-regulation more generally, but third-party funders may piggyback on arbitrator impartiality reforms. There are already efforts underway to incorporate disclosure obligations relating to third-party funders in revisions to the IBA Guidelines on Conflicts.

326  See Born 808–9. For an earlier proposal for analysis of ‘sanction-awards’, see Catherine A. Rogers, ‘Context and Institutional Structure in Attorney Discipline: Developing an Enforcement Regime for Ethics in International Arbitration’, 39 Stan. Int’l L. Rev. 1 (2002).

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Conclusion Assuming third-party funders are addressed in arbitrator disclosure obligations, a related 6.170 obligation for parties to disclose the presence of funders in the dispute would become inevitable. Moreover, as future refinements to counsel ethics are introduced, third-party funding regulation will likely creep in there too. Most obviously, the existence of, and law applicable to, attorney-client privilege can be determined by arbitral tribunals, as illustrated in IBA Evidence Rules, Article 9, discussed earlier.327

  See paras 6.129–6.130.

327

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7 ARIADNE’S THREAD AND THE FUNCTIONAL THESIS A labyrinthine man never seeks the truth, but only his Ariadne. Friedrich Nietzsche Moral agency is embedded in roles[.]‌ Alasdair MacIntyre 7.01 This chapter addresses the development of international substantive ethical rules as part of

the larger project of ethical self-regulation in international arbitration. Chapter 6 examined how ethical self-regulation in international arbitration would be consistent with global governance trends in other areas, such as financial interest rates, safety regulations, or airline seatbelt protocols. Research in those areas demonstrates how development of international rules can be affected by political decision-making,1 can affect the perceived legitimacy of the rule maker,2 and ultimately the efficacy of the resulting rules. In these other contexts, development of international standards for particular industries is often framed in neutral terms that ostensibly address the technical and scientific superiority of one standard over another.3 In debates over technical and scientific standards, an ostensibly neutral yardstick can reduce, even if it does not eliminate, the potential politicization of global rule-making processes.4

7.02 Developing the substance of global legal ethics involves all the same challenges as for other

areas of global governance, but without a neutral yardstick and with its own distinct challenges. The object of regulation for professional ethics is uniquely amorphous. Ethical regulation aims not so much at people, their status, or their performance of specified physical activities, such as manufacturing a product or managing traffic patterns. Professional ethics instead aims at regulating professional conduct. National systems vary, sometimes dramatically, in how they characterize the nature and scope of professional conduct that is subject to ethical regulation.

7.03 What is regulated as professional conduct, and subject to ethical rules, in some legal systems

may be treated exclusively as a matter of procedure, customary practice, client relations, or strategic decision-making in other systems. Even preliminary questions about how to

  See paras 6.80–6.81.   See paras 6.25–6.30. 3  Tim Büthe and Walter Mattli, The New Global Rulers: The Privatization of Regulation in the World Economy (Princeton, 2011) 45. 4  Even if political influence is reduced, other non-substantive factors such as financial support and organizational motivation can affect outcomes. Büthe and Mattli, The New Global Rulers 45. 1 2

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A theory of professional ethics characterize the conduct that is the subject of regulation can require adopting culturally derived value judgments. For example, characterizing pre-testimonial communication with witnesses as a practice of ‘witness preparation’ makes German prohibitions seem reactionary, while characterizing it as ‘witness tampering’ makes the American perspective seem lawless. Just as Ariadne’s thread guided Theseus in finding his way out of the labyrinth after he killed 7.04 the Minotaur, this chapter provides an intellectual filament to trace a path through these conceptual complexities. It provides a framework for identifying the range of conduct to be regulated, and a methodology for developing substantive standards for the international arbitration that avoids selection among competing national ethical rules.5 This theory, called the Functional Thesis, reorients discussion about the nature of profes- 7.05 sional ethics. It avoids using as a starting point culturally bounded moral ideals or misleadingly empty platitudes that purport to be universal moral ideals. At a descriptive level, it provides a culturally neutral tool for illuminating why different national legal systems have adopted different ethical rules. At a prescriptive level, the Functional Thesis provides guidance about how to develop (or defend) the substantive content of ethical standards for international arbitration. The first section of this chapter constructs a model of the Functional Thesis, which is prem- 7.06 ised on the link between morality and role. This section elaborates the thesis and distinguishes it from other role-based theories of legal ethics. This Functional Thesis illuminates, in the second section, why different national systems have adopted conflicting ethical norms identified in Chapters 2, 3, and 4. In sum, those systems have assigned to arbitrators, attorneys, and expert witnesses different functional roles. The third section of this chapter examines how the Functional Thesis can aid in developing international ethical norms, for example, for attorneys and experts. It also reveals how critiques about the ethics of party-appointed arbitrators and party-appointed experts are instead better understood as critiques about their functional roles. This distinction has important implications for developing effective ethics for international arbitration and avoiding ethical mismatches that can undermine instead of strengthen its efficacy and legitimacy.

A.  A theory of professional ethics The starting point for the Functional Thesis is Alasdair MacIntyre’s observation that moral 7.07 agency ‘is embodied in roles’ assigned to actors, who are ‘mutually interdefined in terms of types of relationship’.6 Under this view, situation-specific obligations cannot be analysed outside the context of a specific role. For example, whether a person has a moral obligation to

5  The proposals of this book, and particularly the Functional Thesis, are limited to adjudicatory settings. There are similar, though distinct, issues that arise regarding regulation of transnational legal practice more generally. For some proposals regarding regulation of transnational legal practice, see Catherine A.Rogers, ‘Cross-Border Bankruptcy as a Model for Regulation of International Attorneys’, in Making Transnational Law Work in a Global Economy: Essays in Honour of Detlev Vagts (Cambridge University Press, 2010); Laurel S. Terry, ‘Creating an International Network of Lawyer Regulators: The 2012 International Conference of Legal Regulators’, 18 The Bar Examiner (June 2013); Laurel S. Terry, et al., ‘Trends and Challenges in Lawyer Regulation: The Impact of Globalization and Technology’, 80 Fordham L. Rev. 2661 (2012). 6  Alasdair MacIntyre, ‘What Has Ethics to Learn from Medical Ethics?’ 2 Phil. Exchange 37, 46 (1978).

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Ariadne’s Thread and the Functional Thesis feed a certain child depends on whether the person is the child’s parent, neighbour, babysitter, or a complete stranger (and perhaps even whether the child is on the street in front of the person’s house or in a far-off land).7 The ethical obligations of individuals in each of these situations differ because they perform different functional roles in relation to the child. The difference between a parent and a passer-by seems so obvious, it is unsurprising that they would have different ethical obligations. 7.08 The problem with legal ethics is that the actors come with seemingly universal titles—

‘lawyer’, ‘judge’, ‘expert’, or ‘arbitrator’. Why would a lawyer in the United States have different ethical obligations than a Chinese lawyer, or a German lawyer, or a Chilean lawyer? These apparently universal descriptives, however, mask the fact that there are many different versions of each of these categories of actors. In other words, different legal regimes— both judicial and arbitral—assign these actors different roles, even if they use the same or similar titles to describe them. For example, there appears to be an easy linguistic translation of ‘attorney’ or ‘advocate’ in most languages.8 This linguistic translation belies deeper differences that are revealed when the question ‘ “who is a lawyer?” is posed by efforts to make comparisons across categories not corresponding to formal divisions on the national level’.9 Similarly, it is assumed that anyone who is called an ‘arbitrator’ functions in the same role as any other arbitrator, and that they are all bound by the same ethical obligations. Titles do not always align with functional roles, and titles in themselves have little to do with applicable ethics.

7.09 In contrast to simple titles, functional roles establish the broad outlines of professional obli-

gations. Interrelational functional roles necessarily set certain conduct as completely out of bounds, unethical, and inappropriate. For example, since the role of an advocate is to represent a party’s interests in a case before a tribunal, the advocate cannot perform this function effectively if the advocate represents both sides in the same case.10 Meanwhile, a judge’s role is to decide a case based on the legal and factual arguments presented, and that role could not be performed if the judge were permitted to preside over a case in which he or she were also a party.11

7.10 While role can establish that certain conduct is completely off limits, it generally cannot

distil complex ethical quandaries down to a single undeniable, controlling rule or algorithm,

7 This example is borrowed from Ted Schneyer’s insightful work, Ted Schneyer, ‘Moral Philosophy’s Standard Misconception of Legal Ethics’, 1984 Wis. L. Rev. 1529, 1534; see also Vincent Luizzi, A Case for Legal Ethics (1993) (arguing that lawyers’ norms are forged within a social practice and derived from role conceptions (the lawyer as advocate, negotiator, advisor, etc.) rather than from vague starting points such as John Rawls’ ‘original position’); Ted Schneyer, ‘My Kind of Philosopher: A Lawyer’s Appreciation of Joel Feinberg’, 37 Ariz. L. Rev. 10 (1995). 8  The term ‘advocate’, and its counterparts in other Western European languages (i.e., the French avocat and avoué, the Italian avvocata, the Spanish abogado, the Swedish advokat, or the Polish adwocacka) have common historical origins. See Linda S. Spedding, Transnational Legal Practice in the EEC and the United States 88 (1987). 9  Philip S.C. Lewis, ‘Comparison and Change in the Study of Legal Professions’ in Richard L. Abel and Philip S.C. Lewis, (eds.) Lawyers in Society, Volume Three: Comparative Theories (1989) 27–79, 32; see also Kelly Crabb, ‘Providing Legal Services in Foreign Countries: Making Room for the American Attorney’, 83 Colum. L. Rev. 1767, 1770 and n. 13, 1779–82 and nn. 62–82 (1983) (Note) (describing the various national designations for persons who perform legal functions). 10  For a more precise definition of the advocate’s role, see paras 7.33–7.35. 11  For a more precise definition of the judge’s role, see paras 7.23–7.33.

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A theory of professional ethics such that compliance with the rule would obviate the need for any personal ethical reflection. The interrelational role performed by a particular actor instead establishes a range of choices that would facilitate fulfillment of that person’s role and helps identify the factors to be taken into account in making ethical decisions. In professional contexts, ethical codes crystallize a critical fraction of that range into a mandatory 7.11 framework. Resolution of the other issues, which occupy what remains of that range after the mandatory rules are carved out, is left to the personal and professional judgment of the professional. In sum, ethical rules and codes simply make certain choices impermissible and frame the enquiry for other choices. These observations lead to an important distinction: Ethical codes do not establish the role of a 7.12 professional. They guide and facilitate performance of an already-established professional role. The starting point for developing ethical standards, therefore, is to define the role of the agent. As will be seen, this distinction provides a methodology for developing international ethics in light of conflicting national ethical rules. It also provides background for examining how certain criticisms aimed at party-appointed arbitrators’ ethical conduct are better understood as objections to the roles assigned to them.12 1.  Determining professional roles The blueprints for the functional role of actors within a particular adjudicatory regime are the 7.13 procedural arrangements of that regime.13 Procedures, in turn, are chosen to reflect and promote the values that underlie the larger legal culture or adjudicatory goals of a particular legal system. Procedures emerge out of and reify the culture of a society, meaning ‘those beliefs about how to properly relate to each other that are deeply held, widely shared, and persistent over time’14 and the political structures that enshrine those cultural values. Procedures are, then, integrally linked to the cultural and political values of the legal system for which they were designed. Looking through the other end of the spyglass, cultural and political values motivate pro- 7.14 cedural choices; those procedural choices in turn determine the advocate’s inter-relational role in a particular adjudicatory setting; inter-relational roles then shape the outlines of the ethical norms that apply to those moral agents, such as judges or attorneys. The flow of relationships might be visualized as a descending hierarchy of tiers that begins with cultural and political values, which determine procedures, which in turn determine role, and finally determine ethical obligations. Under this framework, national ethical regimes can ultimately be understood as reflecting procedurally-determined and culturally-bound differences in the values of national legal systems. Although described as a unidirectional flow, the tiers are linked in a feedback loop. Each 7.15 of the lower tiers feeds back up to legal culture, which then reinforces the roles assigned to actors through procedures, and the ethical obligations of those actors. In this respect,

  See paras 8.37–8.76.   See Judith Resnik, ‘Tiers’, 57 S. Cal. L. Rev. 837, 839 (1984) (arguing that procedure has normative content reflected in the features of procedural models and the structure of decision-making). Other factors that affect the role of the attorney are rules of evidence and cultural traditions. 14  See Oscar G. Chase, ‘Legal Processes and National Culture’, 5 Cardozo J. Int’l & Comp. L. 1, 8 (1997); see also Geert Hofstede, Culture’s Consequences (Sage Publications, 1980) 25; Roger Cotterrell, ‘The Concept of Legal Culture’, in D. Nelken (ed.), Comparing Legal Cultures (Dartmouth, Aldershot, 1997). 12 13

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Ariadne’s Thread and the Functional Thesis procedures and related roles are ‘both an expression of a culture’s values and a mechanism for maintaining those values’.15 As Professor Damaska explains: [D]‌ominant ideas about the role of government inform views on the purpose of justice, and the latter are relevant to the choice of many procedural arrangements. Because only some forms of justice fit specific purposes, only certain forms can be justified in terms of the prevailing ideology.16

Legal culture, in other words, ‘both shapes and is shaped by the conduct of [a]‌community’s members’.17 7.16 In an adjudicatory system, conduct essential to performance of a particular role is embedded

in procedures and reinforced by ethical norms that inform and facilitate practice pursuant to those procedures. Understanding the causally inter related links that connect cultural values to legal ethics provides a more nuanced and realistic understanding of why different legal systems impose different ethical obligations on professional conduct. Differentiating national ethical rules are not simply a matter of cultural relativism. There are instead concrete practical effects of cultural relativism that make certain ethical standards well-suited as a practical matter to certain systems, but not others.

7.17 One example of what can go wrong in defining ethical obligations when the role of the actor

to be regulated has not been well defined is by looking at some misguided efforts at developing arbitrator ethics. Instead of a clear role definition, some national courts and authorities have instead sought to rely on misplaced analogical reasoning. In some instances, the analogy is predicated on comparisons between judicial and arbitrator ethics.18 The reasoning behind reliance on a judicial referent is that arbitral decision-making substitutes for judicial decision-making, so arbitral impartiality should be measured against the base model of judicial impartiality.

7.18 The problem with the analogy to judicial ethics is that it produces more confusion than clar-

ity. As Carrie Menkel-Meadow explains:

Many think that the Judicial Code of Conduct can be used as a benchmark for ethical standards and professionalism in situations where lawyers play adjudicative roles. I do not agree, since the judge has a permanent role, which allows him to be at arm’s length from parties on a regular basis. Arbitrators who may depend on parties choosing and paying them may be closer to lawyers seeking clients in some respects, while resembling judges in others.19

Even if the same term, ‘impartiality’, is used in both contexts, it is not readily transferable between the two. While adjudicators in both contexts seem to be performing the same task (i.e., resolving disputes), they have, as will be analysed later in this chapter, been assigned different roles in performing that task. The distinction in role is manifested in certain features of their professional profile. 7.19 Judges are sequestered from the professional community by rules that prohibit profes-

sional affiliations,20 whereas arbitrators are often, preferably, drawn from the ranks of active   See Chase, ‘Legal Processes and National Culture’ 9.   Mirjan R. Damaška, The Faces of Justice and State Authority: A Comparative Approach to the Legal Process (1986) 11. 17  Joshua Karton, The Culture of International Arbitration and the Evolution of Contract Law (2013) 19. 18  See, e.g., Luxembourg Code of Civil Procedure, Art. 378; Portuguese Law on Voluntary Arbitration, Art. 10(1); Quebec Code of Civil Procedure, Art. 942. 19  Carrie Menkel-Meadow, ‘Ethics and Professionalism in Non-Adversarial Lawyering’, 27 Fla. St. U.L. Rev. 153 n. 49 (1999). 20  For example, in the United States, ‘[u]‌sually, by virtue of a statutory provision or a rule of court, a judge of a court of record is prohibited from practicing law’. 46 Am. Jur. 2d Judges § 48 (2004). 15 16

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A theory of professional ethics professionals. Judges are randomly assigned to individual cases21 and litigants are discouraged from forum shopping, but parties deliberately and individually select arbitrators who are presumably predisposed toward their case.22 Judges are expressly precluded from receiving even nominal or indirect compensation from cases they preside over,23 but arbitrators typically earn lavish fees. As an ultimate affront to notions of judicial impartiality, the availability of arbitrators’ fees can depend in part on the substantive outcome of arbitrators’ own decisions.24 In sum, when arbitrators step into judges’ ethical shoes, they seem to be wearing them on the wrong feet. There are also the many functions that have ethical obligations or implications, but are 7.20 clearly not translatable from one role to the other. For example, international commercial arbitrators are generally regarded as having an obligation to maintain the privacy, if not the confidentiality, of the proceedings25 in the absence of party consent to disclosure. Judicial adjudication, meanwhile, is an inherently public activity. In the United States and many other countries, judges are constitutionally compelled to open courtroom proceedings to the public.26 US judges are ethically restricted regarding the nature and type of political activities in which they can engage,27 but such restrictions make no sense for arbitrators. These examples illustrate why ethical obligations cannot simply be transplanted. They must be derived instead from clearly defined roles of the decision-maker, either judge or arbitrator. There have been similarly befuddled suggestions that the role of the advocate-lawyer could 7.21 be a basis for extrapolating arbitrator ethics.28 The primary rationale for using attorney

21   Jonathan R. Macey, Judicial Preferences, Public Choices, and the Rules of Procedure, 23 J. Legal Stud. 627, 630 (1994); Emerson H. Tiller and Frank B. Cross, ‘A Modest Proposal for Improving American Justice’, 99 Colum. L. Rev. 215, 216 (1999). 22   ‘[T]‌he law struggles mightily, and generally successfully, to prevent judicial forum shopping . . . In arbitration, by contrast, something akin to forum shopping—the search for a panel with the array of experience and skills sought by the parties—is not only permitted but encouraged.’ Francis O. Spalding, ‘Selecting the Arbitrator: What Counsel Can Do’, in What the Business Lawyer Needs to Know About ADR (Commercial Law and Practice Course Handbook Series No. 770, Practicing Law Institute, 1998) 351, 353. 23   In the United States, the principle has been held to preclude an old practice of calculating judges’ incomes based on the number of convictions they presided over. See Tumey v Ohio, 273 U.S. 510, 523 (1927) (concluding that under this arrangement, the judge would have a ‘direct, personal, substantial pecuniary interest’ in the outcome of the case). 24  See William W. Park, ‘Bridging the Gap in Forum Selection: Harmonizing Arbitration and Court Selection’, 8 Transnat’l L. & Contemp. Probs. 19, 50 (1999) (‘Presumably arbitrators will be more likely than courts to find jurisdiction, since arbitrators get paid if they hear a dispute.’); Julia A. Martin, ‘Arbitrating in the Alps Rather Than Litigating in Los Angeles: The Advantages of International Intellectual Property-Specific Alternative Dispute Resolution’, 49 Stan. L. Rev. 917, 967 (1997) (arguing that since arbitrators’ fees under the ICC rules are set based on ‘the complexity of the case, as reflected in the award’, arbitrators have ‘an incentive to write unnecessarily elaborate opinions’). 25  Gary B. Born and Ethan G. Shenkman, ‘Confidentiality and Transparency in Commercial and Investorstate International Arbitration’, in Catherine A. Rogers and Roger Alford (eds.), The Future of Investment Arbitration (Oxford University Press, 2009) 5. 26  See Richmond Newspapers, Inc. v Virginia, 448 U.S. 555, 581 n. 18 (1980) (concluding that the public has a qualified First Amendment right to access criminal trials). 27  Shirley S. Abrahamson and Robert L. Hughes, ‘Shall We Dance? Steps for Legislators and Judges in Statutory Interpretation’, 75 Minn. L. Rev. 1045, 1088 (1991) (noting that judges are ethically prohibited from engaging in political activities because ‘[t]‌he public expects the courts to work above the tangle of partisan politics’). 28  See, e.g., Schmitz v Zilveti, 20 F.3d 1043, 1048 (9th Cir. 1994) (tying an arbitrator’s obligation to investigate possible conflicts of interest to his status and ethical obligations as a lawyer); see also Geoffrey C. Hazard, Jr., ‘When ADR Is Ancillary to a Legal Practice, Law Firms Must Confront Conflicts Issues’, in 12 Alternatives to the High Cost of Litigation (1994) 147, 147 (‘Applying this rule [regarding conflicts of interest] to [mediation], a law firm engaging in ADR practice must observe the rules of ethics—particularly the rules concerning

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Ariadne’s Thread and the Functional Thesis ethics is that although the attorney and the arbitrator perform different tasks, the same actor is performing both tasks and therefore could be regulated by the same source. This identity of actors is what has inspired some efforts by national bar authorities, described in Chapters 2 and 6, to incorporate arbitrator ethical obligations into their codes of conduct for attorneys.29 7.22 Despite performing different tasks, there seem to be some similarities between the rel-

evant ethical obligations on lawyers and arbitrators. Attorneys must be free from conflicts of interest, just as arbitrators must be free from bias. Attorneys must conduct ‘conflict checks’ before accepting representation, just as arbitrators have a ‘duty to investigate’ before accepting an appointment.30 As Carrie Menkel-Meadow points out, however, ‘[o]‌ur conventional rules of ethics are particularly inapposite when lawyers serve in quasijudicial roles as arbitrators. . .’.31 Attorney ethics were developed for those acting in the role of advocate, where the hallmark is loyalty to, not independence from, a client.32 The role of lawyer is fundamentally different than the role of adjudicator, even if both tasks can be undertaken by the same person.33 Development of arbitrator ethics requires, as a starting point, a clear definition of the role of the arbitrator within the larger category of adjudicators. 2.  The role of adjudicators

7.23 Arbitrators and judges are both subsets of the larger category of adjudicators. Attempts

to rely on judicial ethics to define arbitrator ethics wrongly presume that arbitrators, who are sometimes even called ‘private judges’, are a subset of the category of judges. This analysis leads to the misleading judicial referent described earlier, and to the conceptual confusion that follows. The process of defining the role of the arbitrator must begin, instead, by defining more generally the role of the adjudicator and, with that definition in hand, explaining the nature and effects of variations within that general category on arbitrator ethics.

7.24 All adjudicators share certain core features, which derive from the nature of adjudication

itself. Although the ultimate aspirations and limits of adjudication have been subject to heated debate,34 Lon Fuller’s classical definition of adjudication provides the core for a universal

conflict of interest—in the ADR work and the other practice, considering them as a single practice.’); John Yukio Gotanda, ‘Setting Arbitrators’ Fees: An International Survey’, 33 Vand. J. Transnat’l L. 779, 801–6 (2000) (arguing that Model Rules 2.2 and 5.7 might apply to attorneys acting in the capacity of arbitrator). 29  See paras 2.93–2.96 and 6.113–6.114. 30   Menkel-Meadow, ‘Ethics and Professionalism in Non-Adversarial Lawyering’ 183–4. 31   Menkel-Meadow, ‘Ethics and Professionalism in Non-Adversarial Lawyering’ 162; see also Carrie MenkelMeadow, ‘The Lawyer as Consensus Builder: Ethics for a New Practice’, 70 Tenn. L. Rev. 63, 63–84 (2002) (analysing how the functional role of advocates differs from various dispute resolvers). 32   Lawyers’ duty of loyalty and tolerance for lawyers’ independence are not universal. For a comparative analysis of the attorney’s duty of loyalty, see Rogers ‘ Fit and Function in Legal Ethics: Developing A Code of Conduct for International Arbitration’, 23 Mich. J. Int’l L. 341, 368–70. 33  One attorney might be bound by two different sets of professional obligations—one when he or she is acting in the role of advocate and another when he or she is acting as a decision-maker. The multiplicity of ethical obligations is a product of the fact that ‘no one is ever an abstract moral agent’. Rogers, ‘Fit and Function in Legal Ethics’ 381. 34  See, e.g., Abram Chayes, ‘The Supreme Court, 1981 Term-Foreword: Public Law Litigation and the Burger Court’, 96 Harv. L. Rev. 4 (1982); Abram Chayes, ‘The Role of the Judge in Public Law Litigation’, 89 Harv. L. Rev. 1281 (1976); Owen Fiss, ‘The Social and Political Foundations of Adjudication’, 6 Law & Hum. Behav. 121 (1982); Owen Fiss, ‘The Supreme Court, 1978 Term-Foreword: The Forms of Justice’, 93 Harv. L. Rev. 1 (1979).

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A theory of professional ethics definition.35 Fuller defined adjudication as ‘a process of decision that grants to the affected party a form of participation that consists of the opportunity to present proofs and reasoned arguments’.36 The three constitutive elements or ‘ordering principles’ of adjudication under this definition are reason, adversarialism,37 and separateness,38 although these terms themselves are the subject of significant debate.39 Fuller uses these features to distinguish adjudication from other forms of social ordering, such as contract and political decision-making.40 While Fuller provides a critical core, to distinguish adjudication from other forms of dis- 7.25 pute resolution and political decision-making, some additional features are needed.41 Adjudication is ‘authoritative’, meaning that the ultimate decision is final and binding on the parties.42 This feature distinguishes adjudication from other forms of alternative dispute

35   See Lon L. Fuller, ‘The Forms and Limits of Adjudication’, 92 Harv. L. Rev. 353, 369 (1978). As Jonathan Molot has pointed out, ‘[A]‌ny victory Chayes enjoyed over Fuller, and any defeat suffered by Fuller, was only partial. Chayes may have succeeded in discrediting Fuller’s arguments regarding the types of disputes courts could handle (which Fuller dubbed adjudication’s “limits”), but he did not discredit Fuller’s observations regarding the adjudicative process (which Fuller dubbed adjudication’s “forms”).’ Jonathan Molot, ‘An Old Judicial Role for a New Litigation Era’, 113 Yale L.J. 27, 36 (2003). 36   Fuller, ‘The Forms and Limits of Adjudication’ 369. 37   Fuller’s definition of ‘adversarialism’ is framed narrowly in terms of the uniquely US-style ‘partisan advocate’. While a dispute is, by definition, founded on adverse positions that must be advocated and advanced by the parties and their counsel, it is not necessarily true that that function must take the form of US-style ‘partisan advocacy’. The accentuation of a culturally defined adversarialism prevents Fuller’s definition from having crosscultural, universal potency. One possible explanation for Fuller’s cultural blinders is that although he averred to be defining adjudication in ‘the very broadest sense’, he was really only attempting to define the meaning of adjudication within the framework of the US Constitution. See Fuller, ‘The Forms and Limits of Adjudication’ 353. 38   Fuller and many other scholars of procedure use the term ‘impartiality’, but in an imprecise way that conflates two distinct concepts: the moral agent’s role and the ethical requirements that derive from that role. The term ‘separateness’ connotes the status or role of a decision-maker in relation to the parties, whereas ‘impartiality’ connotes the resulting mental state or conduct that should flow from that status. 39   For example, like the term ‘impartiality’, the term ‘adversarialism’ has multiple connotations. Fuller and other more contemporary scholars of US procedure ascribe an intracultural meaning to the term, while comparativist scholars use the term to designate intercultural differences, particularly to contrast ‘inquisitorial’ systems on the Continent. The former uses ‘adversarial’ to designate the dialectic ideal underlying litigation as a form, whereas the latter uses the term to emphasize the fact that the parties, not the judge, controls the gathering of evidence and presentation of proofs. Compare Fuller, ‘The Forms and Limits of Adjudication’ 383 (‘It is only through the advocate’s [partisan] participation that the hearing may remain in fact what it purports to be in theory: a public trial of the facts and issues.’) with Francesco Parisi, ‘Rent-Seeking Through Litigation: Adversarial and Inquisitorial Systems Compared’, 22 Int’l Rev. L. & Econ. 193, 193 (2002) (‘Scholars of comparative civil procedure often contrast American and Continental European legal systems by reference to the distinctive functions fulfilled by judges and lawyers in the two legal traditions. A distinction is often drawn between “adversarial” and “inquisitorial” procedural systems.’). In elaborating a theory of adjudication, the term is used neither as an ideal nor a culturally defined preference, but as a descriptive heuristic of one of the ‘valued features’ of any adjudication, which can be amplified or muted in relation to other competing features as demanded by a particular adjudicatory system. 40  Fuller, ‘The Forms and Limits of Adjudication’ 366–69. 41  Many of these ‘additions’ actually derive from or can be found in Fuller’s writings on the subject. While Fuller’s descriptive formulations are useful, it does not necessarily follow that these formations derive from, or are inextricably linked to, the natural law theories as Fuller suggests. For a discussion of the natural law foundations of Fuller’s theories, see generally Robert G. Bone, ‘Lon Fuller’s Theory of Adjudication and the False Dichotomy Between Dispute Resolution and Public Law Models of Litigation’, 75 B.U. L. Rev. 1273, 1290 (1995) (arguing that Fuller ‘assumed there were natural principles that guided the ordering process’). 42  This feature is implicit in Fuller’s description of the products of adjudication, judicial decisions, as ‘authoritative determinations’, see Fuller, ‘The Forms and Limits of Adjudication’ 368, as well as some of his other writings. See Lon L. Fuller, ‘Collective Bargaining and the Arbitrator’, in Mark L. Kahn (ed.), Collective Bargaining and theArbitrator’s Role: Proceedings Of The Fifteenth Annual Meeting National Academy of Arbitrators (BNA, 1962) 29–33. See also Geoffrey C. Hazard, Jr., ‘From Whom No Secrets are Hid’, Tex. L. Rev. 1665, 1670 (1998) (‘[A]‌n adjudicative system by definition requires a principle of finality.’).

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Ariadne’s Thread and the Functional Thesis resolution, such as mediation,43 or even political decision-making, in which voters or politicians are completely free to reconsider and revise their initial decision. 7.26 A final essential feature of adjudication is that it necessarily implies a jurisdictionally bounded

decision.44 In this sense, ‘jurisdiction’ refers both to the power of bodies to subject persons or things to adjudicative processes, as well as implicit limitations on those bodies’ decisionmaking power.45 These notions of authoritative and jurisdictionally bounded decision-making imply the closely related requirement that adjudication exist within a ‘system’,46 meaning within a series of interrelated units that work together to effectuate its outcomes.47

7.27 A fully operational definition of adjudication, therefore, is a process to facilitate final, bind-

ing, and jurisdictionally bounded decisions that operates within a system and is based on the opportunity of participants to present proofs and reasoned arguments to third parties. This basic definition is subject to innumerable particularized interpretations within various systems, which may choose to invigorate one feature while muting another. Any process that completely lacks one of these features, however, cannot be considered adjudication.

7.28 This core definition of adjudication, in turn, implies certain fundamental procedural func-

tions that must be performed by an adjudicator in relation to other actors in the adjudicatory process. The archetypal adjudicator can be described as a third party who is empowered to render authoritative and reason-based decisions after considering arguments from both sides.48 With this definition of an adjudicator’s functional role, it becomes clear that to

43   David B. Lipsky and Ronald L. Seeber, ‘In Search of Control: The Corporate Embrace of ADR’, 1 U. Pa. J. Lab. & Emp. L. 133, 133 n. 2 (1998) (suggesting that the basis for distinguishing mediation from arbitration is whether the process is non-binding or binding); David A. Newton, ‘Alternative Dispute Resolution in Australia’, in Karl J. Mackie (ed.), A Handbook of Dispute Resolution: ADR in Action (Rouledge. 1991) 231 (noting the use of the term ‘non-binding ADR’ to distinguish between adjudicative and non-adjudicative forms of ADR, arbitration belonging to the former category). 44   See Fuller, ‘The Forms and Limits of Adjudication’ 355 (noting that ‘certain problems by their intrinsic nature fall beyond the proper limits of adjudication’ though how these problems are to be defined remains even today a subject for debate). 45   cf. David Luban, ‘The Adversary System Excuse’, in David Luban (ed.), The Good Lawyer: Lawyers’ Roles and Lawyers’ Ethics (Rowman and Littlefield, 1983) 90 (defining the ‘adversary system’ as ‘a method of adjudication characterized by three things: an impartial tribunal of defined jurisdiction, formal procedural rules, and . . . assignment to the parties of the responsibility to present their own cases and challenge their opponents’) (footnote omitted). 46  Adjudication necessarily operates within a larger system because the other units are necessary to ensure enforcement of adjudicatory decision-making, and to ensure that adjudicatory decision-making operates within its prescribed jurisdictional limitations. While a system is required, the system does not need to satisfy all the technical requirements of a legal system, even if nonlegal systems of adjudication almost inevitably rest on underlying legal systems for enforcement. See David Charny, ‘Illusions of a Spontaneous Order: “Norms” in Contractual Relationships’, 144 U. Pa. L. Rev. 1841, 1841 (1996). 47  See generally Lynn M. LoPucki, ‘The Systems Approach to Law’, 82 Cornell L. Rev. 479 (1997) (offering various definitions of systems). The notion that adjudication produces jurisdictionally bounded decisions within a system distinguishes it from, for example, a mother’s decision, upon hearing competing arguments from her two children about which one is entitled to possession of a favourite toy. In his essay, Fuller seeks to include even this mode of decision-making in his definition of adjudication. See Fuller, ‘The Forms and Limits of Adjudication’ 353. 48  The definition of an adjudicator that emerges from my definition of adjudication illustrates even more precisely why parental resolution of a sibling squabble is not adjudication. The parent is not required to consider arguments from both sides or to render a reason-based decision. Surely a good parent would listen to both children, and would decide based on reasons, but parental decision-making is not founded on or defined by these requirements, whereas an adjudicator’s decision-making is. See Catherine A Rogers, ‘Regulating International Arbitrators: A Functional Approach to Developing Standards of Conduct’, 41 Stan. J. Int’l L. 53,82 n. 165 (2005) and accompanying text. Those people who serve as adjudicators may perform other functions corollary to their adjudicatory functions, and those functions may carry their own ethical obligations. See generally, Murray

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A theory of professional ethics perform this functional role an adjudicator must, at some level, have an ethical obligation to be impartial. Bringing reasoned analysis to bear on legal problems necessarily requires being detached enough to engage in rational analysis of the problem49 as well as an ability to consider arguments from both sides. These functions necessarily imply an obligation of impartiality.50 Absent impartiality, outcomes would not be based on reasoned application of legal rules or premised on parties’ evidence and arguments, but on the personal interests or preferences of the decision-maker. The fact that an adjudicator’s functional role is jurisdictionally bounded implies an obli- 7.29 gation to respect the limits of their jurisdiction.51 The ethical nature of this obligation explains why errors regarding jurisdiction are often described in terms that imply moral or ethical judgment, whereas incorrect substantive results are generally described simply as errors.52 Finally, the authoritative nature of adjudicatory outcomes, as well as their existence within a larger system, imposes on adjudicators an obligation to preserve the integrity and legitimacy of the adjudicatory system in which they operate.53 These responsibilities to the system might translate into obligations to perform certain administrative functions,54 to avoid certain external activities that are inconsistent with their adjudicatory function,55 and to avoid the ‘appearance of impropriety’.56 In sum, the Functional Thesis reveals that the

L. Schwartz, ‘The Other Things That Courts Do’, 28 UCLA L. Rev. 438 (1981) (examining the non-adjudicatory activities of courts, including promulgating rules, appointing officers, and administering probate estates). 49   John Leubsdorf argues that the aim of judicial disqualification standards should be to ensure that judges are able to put aside personal considerations, are willing to listen, and are able to act as a clean slate. See John Leubsdorf, ‘Theories of Judging and Judge Disqualification’, 62 N.Y.U. L. Rev. 237, 280–90 (1987). 50   In this context, ‘fairness’ is used in a procedural sense to refer to an affirmative obligation to treat the parties equally as well as a negative obligation to avoid bias that would interfere with an adjudicator’s equal consideration of both sides. ‘Procedural fairness’ has many different connotations. In this sense, ‘procedural equality’ and its relationship to fairness is perhaps the most fundamental, what Professor Bill Rubenstein refers to as ‘equipage equality’, or equal opportunities for litigants to produce evidence and arguments. See William B. Rubenstein, ‘The Concept of Equality in Civil Procedure’, 23 Cardozo L. Rev. 1865, 1874 (2002). As Jerry Mashaw observes, even in the narrower sense of equality of procedural opportunity, ‘equality is a notoriously slippery concept, and its procedural implications are puzzling’. Jerry L. Mashaw, ‘Administrative Due Process: The Quest for a Dignitary Theory’, 61 B.U. L. Rev. 885, 899 (1981). 51   In an extreme example, a traffic judge had a coffee vendor, who the judge had concluded was selling ‘putrid’ coffee, brought to his chambers in handcuffs. Zarcone v Perry, 572 F.2d 52, 53 (2d Cir. 1978). The judge was charged with ethical violations for abusing his office and exceeding his jurisdiction. In re Perry, 53 A.D.2d 882, 882, 385 N.Y.S.2d 589, 589 (2d Dept.), appeal dismissed, 40 N.Y.2d 1078, 392 N.Y.S.2d 1029, 360 N.E.2d 964 (1976). The judge was ultimately removed from office and held civilly liable for violating the vendor’s constitutional rights. 52  ‘Conduct in excess of clearly defined limits of a judge’s authority may amount to misconduct requiring the disciplinary action be taken[.]‌’ 48A C.J.S. Judges §109 (2004). 53  See Christopher J. Peters, ‘Participation, Representation, and Principled Adjudication’, 8 Legal Theory 185, 185 (2002). Christopher Peters’ work links participatory features of adjudication with its legitimacy. Although he seeks to defend the law-making function of US judges, his arguments also help explicate the link between adjudicatory functions and obligations to preserve the system in which those decisions are made. 54  See generally Schwartz , ‘The Other Things That Courts Do’ (examining the non-adjudicatory activities of courts, including promulgating rules, appointing officers, and administering probate estates). 55  See Michelle T. Friedland, ‘Disqualification or Suppression: Due Process and the Response to Judicial Campaign Speech’, 104 Colum. L. Rev. 563 (2004) (discussing constitutional limitations on legislative restrictions regarding judicial campaigning). 56  Under 28 U.S.C. § 455(a), recusal is mandatory ‘in any proceeding in which [the judge’s] impartiality might reasonably be questioned’. The ‘appearance of impropriety’ standard originated as a means of protecting the legitimacy or perceived legitimacy of judicial institutions. In an interesting article, Professor Peter Morgan traces the modern rise of the appearance-of-impropriety doctrine to the Black Sox scandal of 1919, the writings of lawyer/novelist Henry Fielding, and the turmoil following Watergate. See Peter W. Morgan, ‘The Appearance

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Ariadne’s Thread and the Functional Thesis ethical obligations of an adjudicator derive from the interrelational role that is assigned to the adjudicator.57 7.30 These core features of the adjudicator’s role and their attendant ethical obligations are uni-

versal, but only when discussed in the most abstract generalities. Outside this fundamental definition of adjudication, an infinite number of potential dispute resolution models can be designed to serve different goals and communities. In crafting these different adjudicatory models, architects of various systems calibrate differently the specific roles assigned to adjudicators in relation to parties and advocates, and as a consequence, adjudicators’ professional ethical obligations in these systems differ.58

7.31 To design a system, procedural architects answer a host of questions to determine the sali-

ent features of the system: How are individuals selected to serve as adjudicators? How are adjudicators selected for individual cases?59 What are they being asked to decide?60 On what information should their decisions be based? What is the role of parties and their counsel in the process?61 How will the decision-maker evaluate the information presented? What is the decision-maker’s constituency? And, relatedly, what forces constrain decision-making? How does the decision-maker relate to underlying political and governmental structures?62 What recourse is available against decision-maker error or abuse?63 What are the normative

of Propriety: Ethics Reform and the Blifil Paradoxes’, 44 Stan. L. Rev. 593, 594–5 (1992). Although subject to some criticism, the standard has some objective benefits in encouraging voluntary compliance with judicial outcomes. See Janice Nadler, ‘Flouting the Law’, 83 Tex. L. Rev. 1399 (2005) (reporting on the results of an experiment that empirically tested the ‘Flouting Thesis’ in which participants who were exposed to laws and legal outcomes that they perceived as unjust were more willing, as a general matter, to flout unrelated laws). 57   Fuller engages in a similar reasoning of the relationship between judicial functions and the obligation of impartiality. Fuller reasoned that from the office of judge ‘certain requirements might be deduced, for example, that of impartiality, since a judge to be “truly” such must be impartial. Then, as the next step, if he is to be impartial he must be willing to hear both sides’. Fuller, ‘The Forms and Limits of Adjudication’ 365. While Fuller identifies the link, this analysis reverses the causal connection, namely that the obligation of impartiality results from the functional necessity that a judge be willing and able to hear both sides. 58   As noted earlier, Professor Leubsdorf has recognized the link between ethical standards and role, albeit in the judicial context. See Leubsdorf, ‘Theories of Judging and Judge Disqualification’ 239. cf. M.D.A. Freeman, ‘Standards of Adjudication, Judicial Law-Making and Prospective Overruling’, 26 Current Legal Probs. 166, 181 (1973) (‘Every institution embodies some degree of consensus about how it is to operate. To understand the judicial role and apprise the legitimacy of judicial creativity one must explore the shared expectations which define the role of judge.’). 59  J. Robert Brown, Jr and Allison Herren Lee, ‘Neutral Assignment of Judges at the Court of Appeals’, 78 Tex. L. Rev. 1037, 1044 (2000). 60  As Leubsdorf has noted, ‘[t]‌o define what a judge is is to decide what a system of adjudication is all about’. Leubsdorf, ‘Theories of Judging and Judge Disqualification’ 237. 61  As I have explained elsewhere, the role of parties and their counsel in proceedings is a complementary counterpart to the judicial role. If the judge is assigned the role of questioning witnesses, as in civil law systems, attorneys’ role with regard to witness testimony is circumscribed to suggesting questions or adding minor clarifications. See Rogers, ‘Fit and Function in Legal Ethics’ 413–4. 62  For example, most democratic systems depend on a judiciary that is independent of other branches of government. In the international and ADR contexts, the question is more how decisions relate to the public government or governments. The Uniform Domain Name Dispute Resolution Policy (UDRP), for example, was expressly designed as a soft-law system that supplements but does not supplant national court adjudication of domain name disputes. Laurence R. Helfer and Graeme B. Dinwoodie, ‘Designing Non-National Systems: The Case of the Uniform Domain Name Dispute Resolution Policy’, 43 Wm. & Mary L. Rev. 141, 203 (2001). 63  This question inquires not only about the availability of appeal, but the standards under which review of an adjudicator’s decision will be evaluated.

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A theory of professional ethics objectives of adjudication?64 And how will the legitimacy and correctness of the outcomes be measured? The answers to all of these and related questions are the procedures that undergird different models of adjudication. Although the responses to all of these questions can affect the role of adjudicators, the 7.32 primary determinants are: the manner in which they are selected and appointed to their positions as decision-makers, the nature of the decisions they are asked to render, and the procedural arrangements through which they make their decisions. The next section examines the generic advocate’s role. The sections that follow then use the Functional Thesis to analyse how the roles of adjudicators and advocates shift in different national legal systems. 3.  Defining the advocate’s role An advocate is a representative of a party who is retained to bring professional knowledge and 7.33 expertise to facilitate the party’s presentation of its case before a neutral tribunal. Embedded in this definition is an inherent contradiction that underlies the attorney’s functional role.65 On the one hand, as a facilitator within the adjudicatory process, advocates occupy a quasi-official role as agents in the process of justice. This role imposes on them certain obligations to courts, the legal profession, and the public at large. On the other hand, advocates are retained by one party to pursue victory over the opposing party.66 In this capacity, advocates owe to their clients duties that can be at odds with their other obligations to courts, the profession, and the public.67 The interrelationship between these competing sets of obligations is where most debates 7.34 about attorney ethics occur. These competing obligations can be conceptualized as a Venn diagram, composed of two overlapping circular zones. Each sphere is composed of the various particular ethical obligations. Obligations relating to fairness and truthfulness are in the

64   For a discussion of the different normative goals of the US and civil law adjudicatory systems, and the link between those goals and countries’ cultural values, see Chase, ‘Legal Processes and National Character’ 17–18 (citing Geert Hofstede, Culture’s Consequences (Sage Pub. 1980) 25). 65  This insight is given its most potent expression by Professor Post, who postulates that lawyers are despised because they are our own ‘dark reflection’. Robert C. Post, ‘On the Popular Image of the Lawyer: Reflections in a Dark Glass’, 75 Cal. L. Rev. 379, 386 (1987). ‘We use lawyers both to express our longing for a common good, and to express our distaste for collective discipline. When we recognize that the ambivalence is our own, and that the lawyer is merely our agent, we use the insight as yet another club with which to beat the profession.’; see also Eugene R. Gaetke, ‘Lawyers as Officers of the Court’, 42 Vand. L. Rev. 39, 40–41 (1989) (acknowledging the conflicting duality of an attorney’s role); L. Ray Patterson, ‘Legal Ethics and the Lawyer’s Duty of Loyalty’, 29 Emory L.J. 909, 969 (1980) (noting that attorneys have primary obligations to clients, but also obligations as officers of the court). 66  See David B. Wilkins, ‘Who Should Regulate Lawyers’, 105 Harv. L. Rev. 799, 815–8 (1992). 67  The contradictory role of the lawyer advocate is arguably responsible for much of the public anti-attorney animus that has accompanied the profession in its march through the ages. For example, in a poll conducted by the National Law Journal, 42% of those surveyed disapproved of lawyers because either they ‘manipulate the legal system without any concern for right or wrong’ or they ‘file too many unnecessary lawsuits’. ‘What America Really Thinks About Lawyers’, Nat’l L.J., 18 Aug. 1986, S-3. Meanwhile, a combined total of 69% of those surveyed identified as the most positive aspects of lawyers either their ability to elevate their clients as their ‘first priority’ or their ability to ‘cut through red tape’. As Post observes, these statistics demonstrate that ‘lawyers are applauded for following their clients’ wishes and bending the rules to satisfy those wishes . . . [and] at the very same time condemned for using the legal system to get what their clients want, rather than to uphold the right and denounce the wrong’. See also Marvin Mindes, ‘The Lawyer as Trickster or Hero’, 1982 Am. B. Found. Res. J. 177.

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Ariadne’s Thread and the Functional Thesis one sphere, and obligations relating to loyalty and confidentiality are in the other sphere.68 In the centre of each sphere are the universally accepted ethical rules, such as those against bribing judges69 or representing opposing sides in a single dispute.70 The overlap between the two spheres represents those areas in which the obligations are in tension with or directly conflict with each other. Thus, for example, the collision between the obligation to maintain client confidences, on the one hand, and the obligation to avoid making false statements of fact to a tribunal, on the other hand, is located in the shaded area in the middle of Figure 7.1. Duties to 3Ps and System

Duties to Clients

truthfulness & fairness

loyalty & confidentiality

Rules against representing opposing sides in same dispute

Rules against bribing or lying to a judge

Rules regarding attorney obligations in the face of client perjury

Figure 7.1  The legal systems of the world agree on the general structure of the Venn diagram in Figure 7.1, and the core principles of legal ethics in the centre spheres, because these features derive from the universal features of the advocate’s role, described earlier. It is thus not surprising that all systems impose on attorney’s basic commitments to truthfulness, fairness, confidentiality, and loyalty, and essentially acknowledge that there can be some tension between them. Figure 7.1 illustrates the basic structure underlying legal ethics as it applies to a generic advocate. There is, however, no such thing as a generic advocate. 7.35 Each adjudicatory system assigns unique functional roles to advocates in relation to other

actors in the system, such as judges and arbitrators, opposing counsel, clients, and witnesses.71 68  See Catherine A. Rogers, ‘Fit and Function in Legal Ethics: Developing A Code of Conduct for International Arbitration’, 23 Mich. J. Int’l L. 341, 348–54 (2002). 69  For a discussion of universal prohibitions against bribing judges, see Rogers, ‘Fit and Function in Legal Ethics’ 361–62. 70  For a discussion of the universal understanding that attorneys cannot represent opposing sides in a single case, see Rogers, ‘Fit and Function in Legal Ethics’ 368 nn. 129–30. 71  Notwithstanding the supposed universality, and the linguistic similarities among translations of the term ‘advocate’, ‘[t]‌he question “who is a lawyer?” is posed by efforts to make comparisons across categories not corresponding to formal divisions on the national level’. Philip S.C. Lewis, ‘Comparison and Change in the Study of Legal Professions’, in Lawyers in Society, Volume Three: Comparative Theories 27, 32; see also Kelly Crabb, ‘Providing Legal Services in Foreign Countries: Making Room for the American Attorney’, 83 Colum. L. Rev. 1767, 1770 and n. 13, 1779–82 and nn. 62–82 (1983) (describing the various national designations for persons who perform legal functions).

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A theory of professional ethics As a consequence of these different roles assigned to advocates, outside of the nuclear centres of the ethical obligations represented in Figure 7.1, national systems diverge on how expansively they construct the diameter of each surrounding sphere, and in how they engineer the overlap between them. If a system casts the lawyer’s role as primarily that of agent to the client, that system will cast an expansive sphere of obligation onto the client, which often overshadows the attorney’s obligations to the court and society. Other systems may cast the attorney as more of an intermediary who facilitates justice of the State, and thus construct almost the reverse relationship between the spheres.72 Still others may treat attorneys as occupying a role between facilitator of justice and agent of the client, and draw the spheres as roughly equivalent.73 4.  The Functional Thesis in comparative perspective This section takes the Functional Thesis laid out in the last two Sections and puts it to the 7.36 test. Through comparative analysis, it uses the Functional Thesis to illuminate the seemingly enigmatic reasons why different national systems impose sometimes radically different ethical obligations. For pragmatic reasons, this comparative analysis concentrates on the distinctions between roles of judges, attorneys, and experts in the US system, on the one hand, and on a generalized version of a Continental civil law system on the other.74 a.  Role and ethics in the civil law ideal type In national legal systems, the judge75 is the starting point for determining the roles of coun- 7.37 sel, witnesses, and parties.76 In civil law systems, such as those in Germany and Italy, the judge can be described as the engine of the adjudication machine. At least according to the ‘official portrait’, the civil law judge ‘mechanically applies legislative provisions to given fact situations’.77 ‘At least according to the internal folklore, judicial interpretation of [civil] codes does not involve the judges in a process of law creation.’78 This perception of judges

72   Highly authoritarian and socialist regimes envision that lawyers, like all workers, are devoted primarily to the good of society and only minimally to clients, since more vigorous advocacy on behalf of a client might conflict with the collective good. Ethan Michelson, ‘The Practice of Law as an Obstacle to Justice: Chinese Lawyers at Work’, 40 Law & Soc'y Rev. 1, 30 (2006) (‘China’s socialist legality, by demanding that the law serve the interests of the state above all else . . . produces a fundamental conflict of interest between lawyers’ loyalty to the state and their loyalty to their clients.’). Charles F. Wolfram, Modern Legal Ethics (West Pub., 1986) § 1.2, 5 (describing the diminished obligations lawyers in Soviet countries owed to their clients). 73  As will be explained in the following section, this layout might describe the role assigned to lawyers in civil law systems. 74  At this level of generality, the term ‘civil law system’ does not represent any particular system, but instead a prototype or ‘ideal type’, to use Max Weber and Mirjan Damaška’s terminology. See Damaška, The Faces of Justice and State Authority 9. Despite its imprecision, the term is useful as a point of contrast with the US system, and a useful approximation of some of the key differences. 75  When comparing adjudicatory regimes, even the term ‘judge’ can be misleading since it is not a term that is universally assigned to the decision-maker. The most obvious exception is the jury. See Damaška, The Faces of Justice and State Authority 54. 76  The contrasting role of the judge in civil and common law systems has been called the ‘grand discriminant’ between the two systems. See John H. Langbein, ‘The German Advantage in Civil Procedure’, 52 U. Chi. L. Rev. 823, 830 (1985). 77  Mitchel de S.-O.-I’E. Lasser, ‘Judicial (Self-) Portraits: Judicial Discourse in the French Legal System’, 104 Yale L.J. 1325, 1334 (1995). 78  See Jonathan E. Levitsky, ‘The Europeanization of the British Legal Style’, 42 Am. J. Comp.L. 347, 379–80 (1994); see also John Henry Merryman, The Loneliness of the Comparative Lawyer—And Other Essays in Foreign and Comparative Law (1999) 187 (‘The work of the judge is . . . simple: he is presented with a body of principles built into a carefully elaborated systematic structure, which he applies to a body of specific norms

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Ariadne’s Thread and the Functional Thesis as the appliers (rather than makers) of law is both evidenced and reinforced by the formulaic, bureaucratic style of civil law judicial opinions, usually taking the form of a string of phrases sounding in a detached tone and connected by ‘whereas’s’.79 A judicial opinion, with its rhythmic recitals and studied detachment, is the voice of the judicial institution obedient to legislative commands, not the personal judgment of an individual adjudicator.80 Consistent with this function, many systems limit or prohibit judges’ ability to issue dissenting opinions.81 7.38 Scholars have demonstrated that indiscriminate adherence to this ‘official portrait’ can be

overly simplistic. It can mask civil law judges’ innovativeness and occasionally expressly policy-oriented decision-making.82 Nevertheless, the ‘official portrait’ suggests the intellectual heritage of the role of the civil law judge,83 which inevitably continues to shape at some level perceptions of legitimacy for a civil law judge.

7.39 The role of the civil law judge is honed through the process of judicial education and selec-

tion in civil law countries.84 With regard to the education and selection of civil law judges: Civil law judges are part of the civil service. Judges enter a career of judging and advance through the judicial hierarchy. They are educated and trained to be judges. In particular, their education and training equips them to work with language and to engage in the rational and scientific finding of the law. They then gain experience as judges. The judicial hierarchy allows judicial authorities considerable control over lower level judges . . . Their training and experience creates an elite, if anonymous, corps of adjudicators.85

As a result of this education and appointment process, judicial selection is regarded less as a political act than as a technical selection of the most qualified personnel to perform the whose meaning is readily understood and whose application is comparatively easy. The applicable norms need only to be identified and applied[.]‌’). 79   See Rene David and John E.C. Rierly, Major Legal Systems in the World Today (3rd edn. 1985) 142. 80   Lasser, ‘Judicial (Self-) Portraits’ 1334. 81   Katalin Kelemen, ‘Dissenting Opinions in Constitutional Courts’, 14 German L.J. 1345, 1371 (2013) (‘In continental Europe, ordinary judges, with a few exceptions, are still not permitted to state their dissent publicly, and constitutional judges, who attach a higher value to institutional loyalty than common law judges, are still quite reluctant to dissent.’). 82  See Mitchel de S.-O.-I’E. Lasser, ‘“Lit. Theory” Put to the Test: A Comparative Literary Analysis of American Judicial Tests and French Judicial Discourse’, 111 Harv. L. Rev. 689, 695–99 (1998); see also Carl Baudenbacher, ‘Some Remarks on the Method of Civil Law’, 34 Tex. Int’l L.J. 333 (1999) (arguing that American scholars of civilian systems often confuse the ‘folklore’ of those systems with ‘reality’); Claire M. Germain, ‘Approaches to Statutory Interpretation and Legislative History in France’, 13 Duke J. Comp. & Int’l L. 195 (2003) (describing the range of interpretive methods used today by French judges). 83  Lasser affirms the vitality of the official portrait of the civil law judge by pointing to explicit provisions of the French Civil Code that prohibit judges from ‘making’ law, see Lasser, ‘Judicial (Self-) Portraits’ 1335. Lasser just denies that it is the only vision of the judicial function that operates in the French system. 84  See generally John Bell, ‘Principles and Methods of Judicial Selection in France’, 61 S. Cal. L. Rev. 1757, 1757 (1998) (using the French system to examine ‘different types of problems encountered during judicial selection in which the political or policy orientation of the individual judge may not always be a dominant feature’); David S. Clark, ‘The Selection and Accountability of Judges in West Germany: Implementation of a Rechtsstaat’, 61 S. Cal. L. Rev. 1795, 1818 (1998) (noting that France’s selection of judges is based upon ‘the needs of a particular type of judicial function’ and that Germany’s law schools focus on preparing students to become judges and that selection ‘contemplates . . . emphasizing democratic legitimation and neutral administration of justice’). 85  Charles H. Koch, Jr., ‘Envisioning a Global Legal Culture’, 25 Mich. J. Int’l L. 1, 37 (2003). For a classical articulation of judicial selection in civil law countries, see Arthur Taylor Von Mehren and James Russell Gordley, The Civil Law System: An Introduction to the Comparative Study of the Law, 2nd edn. (Little Brown & Co., 1977) 1148.

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A theory of professional ethics judicial function. This assumption is reinforced in the process for promoting civil law judges. The early stages of judicial decision-making are guided by senior judges and career advancement is determined by senior judges’ evaluations.86 At a more realistic level, outside the stiff confines of the ‘official portrait’, when called on to 7.40 fill gaps, civil law judges employ a range of methodologies, including a resort to policy. Even when civil law judges act more creatively outside their ‘official portrait’ and venture into law-making activities, their function still varies significantly from that of their common law counterparts. As a matter of methodology, civil law judges may pronounce new rules based on policy, but 7.41 their primary task is to find the legal solution that is consistent with the Code and contributes to the ‘manifestation of the “organic whole” ’.87 In this endeavour, their primary source is scholarly doctrine,88 which they use in search of an interpretation that coheres with the larger framework of the Code.89 Methodologically, civil law judges may look to prior judicial decisions for guidance but, even if done regularly, reliance on prior judicial decisions does not confer on judicial decision-making the same force of law that it has in common law systems through the doctrine of stare decisis.90 At a procedural level, civil law judges are much more active managers than their 7.42 American counterparts, even under modern US trends that demonstrate a shift toward a more managerial model.91 In countries such as Germany and France, the judge is the one who schedules, sets the agenda for, and presides over a series of hearings,92 decides what proof will be presented and in what order,93 appoints experts, and questions 86   As one scholar explains, civil law judges advance in their careers from an apprenticeship supervised by senior judges, up through increasingly important courts based on their performance, which is evaluated and controlled by other judges in the form of a council. See Charles H. Koch, Jr., ‘The Advantages of the Civil Law Judicial Design as the Model for Emerging Legal Systems’, 11 Ind. J. Global Legal Stud. 139, 143 (2004). 87   Vivian Grosswald Curran, ‘Romantic Common Law, Enlightened Civil Law: Legal Uniformity and the Homogenization of the European Union’, 7 Colum. J. Eur. L. 63, 100 (2001). 88   See Lasser, ‘Judicial (Self-) Portraits’ 1351. 89   Curran, ‘ Romantic Common Law, Enlightened Civil Law’ 76–77. 90   In what has been aptly heralded as a ‘unique collection of outstanding insights into judicial structures and legitimacy, legal theory and reasoning, and comparative law’, editors Neil MacCormick and Robert Summers have brought together a series of commentators who describe the reliance on precedent in European judicial decision-making notwithstanding the absence of formal obligation or authorization to do so. See also Thomas Lundmark, ‘Interpreting Precedents: A Comparative Study’, 46 Am J. Comp. L. 211, 224 (1998) (book review); see generally Neil MacCormick and Robert S. Summers (eds.), Interpreting Precedents: A Comparative Study (Dartmouth Pub. Co., 1997). 91  See Judith Resnik, ‘Managerial Judges’, 96 Harv. L. Rev. 374, 390, 425–427 (1982). 92  Any one of these hearings may dispose of the entire case. See Langbein, ‘The German Advantage in Civil Procedure’ 831. One demonstration of the extent of judicial power is that in France, it is often said there are no formal evidentiary rules. See Gerald Kock and Richard Frase (trans.), The French Code of Criminal Procedure (Fred B. Rothman & Co., 1988) 199 (describing and translating provisions regarding the introduction of evidence from the French Code of Criminal Procedure). While the absence of evidentiary rules may initially seem strange to an American lawyer, it is only because they are accustomed to the presentation of information to a lay jury. Even in the US, when parties agree to a bench trial, often the formal rules of evidence are relaxed. See Damaška, The Faces of Justice and State Authority 130 and n. 60. 93  As John Langbein describes, in the German system: The very concepts of ‘plaintiff’s case’ and ‘defendant’s case’ are unknown. In our system those concepts function as traffic rules for the partisan presentation of evidence to a passive and ignorant trier. By contrast, in German procedure the court ranges over the entire case, constantly looking for the jugular—for the issue of law or fact that might dispose of the case. Langbein, ‘The German Advantage in Civil Procedure’ 830. Although the German judge is obviously much more active than the US version, the ‘inquisitorial’ role of the German judge in civil proceedings can be, and has been, dramatically overstated.

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Ariadne’s Thread and the Functional Thesis witnesses.94 The judge is expected to conduct a pre-hearing review of the files and to come to the case with knowledge of the issues and ideas about how the case should proceed.95 Furthermore, ‘[a]‌s the case progresses[,] the judge discusses it with the litigants, sometimes indicating provisional views of the likely outcome . . . and sometimes encouraging a litigant to abandon a case that is turning out to be weak or hopeless, or to recommend settlement’.96 7.43 These features come together to shape the form of a civil law judge’s role, and it is clear from

this role that the civil law judge’s impartiality obligations need not be, and cannot be, the same as those of a US judge. Because a civil law judge is charged with control over witness questioning and is obliged to ‘move the case along’, forceful and insistent questions of witnesses are not a sign of bias, as it might be in the US system.97 Given the quasi-collaborative role between judges and lawyers in the civil law system, absolute prohibitions against ex parte communication, which exist in the United States,98 are not as necessary.99 Judicial statements regarding the relative strengths of each party’s case during proceedings would not be considered an inappropriate violation of impartiality obligations, and prior knowledge of facts involved in a case are not necessarily grounds for disqualification.100 Decisions, however, that veer away from doctrine toward politically motivated outcomes might more readily be regarded as more improper than they would be in the United States.

7.44 In relation to a judge who is gathering facts, shaping issues, and dutifully applying the law,

the role of the civil law attorney might be described as primarily that of a ‘guide’ to the court.101 The role of guide is, in many respects, collaborative. Some nations make this collaborative, semi-official status explicit, such as in Germany where attorneys are considered

See generally Ronald J. Allen, ‘Idealization and Caricature in Comparative Legal Scholarship’, 82 Nw. U. L. Rev. 785 (1988) (criticizing Langbein for overstating the role of the judge in German civil proceedings). 94   Conventional wisdom among German advocates is that a lawyer should be wary of putting more than three questions to a witness because to put more risks implying that the judge did not do a satisfactory job in initial questioning. See Chase, ‘Legal Processes and National Character’ 4–5. While the conventional wisdom is not always followed, it demonstrates the gravitational force of the judge’s power over fact gathering. 95   See Damaška, The Faces of Justice and State Authority 138 (noting that continental decision-makers are expected to conduct pre-hearing review of the files and are not presumed to come to the case with a ‘virgin mind’). 96  Langbein, ‘The German Advantage in Civil Procedure’ 832. To the extent that US judges engage in some of these tasks, they do so informally, and partially. See Resnik, ‘Managerial Judges’ 377. The divide between civil and common law systems is not always so stark. In Canada, judges have an obligation to assist the jury in summarizing and characterizing the evidence for them, as well as suggesting conclusions that might be drawn from certain evidence and warning the jury of the inherent unreliability of certain types of evidence. Judges may also express an opinion about what would be a reasonable range of damages. John P. Wright, ‘An American Visitor to a Canadian Court’, 4 Green Bag 2d 281, 285 (2001). 97  See also Damaška, The Faces of Justice and State Authority 120 (noting that when a judge ‘grills a witness testifying in favor of one disputant, the other may think that the official is assisting his adversary’). 98  In the United States there are strict prohibitions against ex parte communications, except in the most narrow, and extreme exceptions, such as special proceedings for extraordinary relief through temporary restraining orders, in camera inspections, and similar unusual procedural settings. Wolfram, Modern Legal Ethics 605–6. 99  See Terry, ‘Creating an International Network of Lawyer Regulators’ n. 159 (noting that ‘in many European countries ex parte contact with the court on “non-fundamental” issues is not prohibited’). For similar reasons, as argued elsewhere, European regulation of attorney conflicts of interest may be much less rigorous than regulation in the United States because of expectations that civilian attorneys, in performing their quasi-official role, would maintain professional independence from their own clients, thus reducing the threat of cross-client conflicts. See Rogers, ‘Fit and Function in Legal Ethics’ 390–1. 100  See Rene David and John E.C. Rierly, Major Legal Systems in the World Today, 3rd edn. (Stevens & Sons Ltd., 1985). 101  See David and Rierly, Major Legal Systems in the World Today 142.

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A theory of professional ethics part of a concept called öffentliche Rechtspflege (public administration of law)102 and in Greece the ‘Lawyers’ Code’ characterizes lawyers as ‘unsalaried Public Servants’.103 Advocates’ collaborative role is also recognized and reinforced through a range of traditions, 7.45 such as a host of ‘rights and privileges’ historically enjoyed by Greek attorneys, including special access to public service or administrative offices at times closed to the lay public.104 This link to the government used to be reinforced in many civil law countries by regulations that fix fee schedules, which prescribe particular fees for particular services. Microregulation of attorney fees by the government implied that attorneys were performing state-coordinated functions, not personal services in a predominantly private arrangement.105 Similarly, geographic restrictions in Germany and France, which until relatively recently admitted a lawyer only to a particular bar and a single court (for example, the trial court in the bar of Paris or the first appellate level in Hamburg),106 seemed aimed at ensuring that courts have as regular a roster of attorneys as they do judicial personnel. Even the requirement that civil law lawyers appear in court wearing a robe can be understood as a symbolic reflection of their quasi-official role.107 Consistent with this semi-official role, civil law attorneys are assigned an obligation to 7.46 be ‘independent’ from their clients.108 This obligation means that civil law attorneys are not expected to present a completely unvarnished and uncompromising version of their clients’ positions,109 as Fuller’s partisan advocates would.110 Instead, through their independent professional judgment, they mediate their client’s most aggressive position, presenting a pre-screened and more restrained view of their client’s case to the civil law judge.111

102   See Rudolf du Mesnil de Rochemont, ‘Federal Republic of Germany’, in Dennis Campbell (ed.), Transnational Legal Practice (1982) 127. 103   See Costas K. Kyriakides and Anthony B. Hadjioannou, ‘Greece’, in Transnational Legal Practice 155. 104   See Kyriakides and Hadjioannou, ‘Greece’, in Transnational Legal Practice 155. 105   See Kyriakides and Hadjioannou, ‘Greece’, in Transnational Legal Practice 155. 106   Mary C. Daly, ‘The Dichotomy Between Standards and Rules: A New Way of Understanding the Differences in Perceptions of Lawyer Codes of Conduct by U.S. and Foreign Lawyers’, 32 Vand. J. Transnat’l L. 1117, 1150–1 (1999). These geographic restrictions have recently been lifted under compulsion from the European Union. 107   See Olga Pina, Note, ‘Systems of Ethical Regulation: An International Comparison’, 1 Geo. J. Legal Ethics 797, 809 (1988). 108   The texts of both the US and European code of professional responsibility (the Council of Bars and Law Societies of Europe (CCBE) Code) appear to be similarly committed to the principle of attorney ‘independence’, but the linguistic similarity masks deeply divergent views about what this duty requires. American attorneys also have an obligation of ‘independence’, but the term denotes independence from the state, whereas on the continent ‘independence’ refers primarily to attorneys’ relationships with their clients and other attorneys. Laurel S. Terry, ‘An Introduction to the European Community’s Legal Ethics Part I: An Analysis of the CCBE Code of Conduct’, 7 Geo. J. Legal Ethics 1, 46–8 (1993). 109   See Rogers, ‘Fit and Function in Legal Ethics’ 361–2 (explaining that creativity in legal argument is less tolerated in civil law systems and can be regarded as professionally irresponsible). 110  See David Luban, ‘Rediscovering Fuller’s Legal Ethics’, 11 Geo. J. Legal Ethics 801, 822 (1998) (citing Lon L. Fuller, ‘The Adversary System’, in Harold J. Berman (ed.), Talks on American Law (Random House, 1961) 30). 111  Exercise of professional judgment to temper client positions does not mean civil law laywers are less effective or less committed to clients. An exercise of adversarial restraint can be an effective tool in building credibility and attaining the high ground in an adversarial setting. In addition, it has been argued that ‘an adversarial lawyer transmits more facts that are unfavorable to her own client . . . [a]‌pparently [induced] to candor

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Ariadne’s Thread and the Functional Thesis 7.47 Through understanding the different role assigned to advocates in relation to courts and

their clients in civil law systems, it is clear that the ethical spheres depicted in Figure 7.1 must shift to accommodate these different inter-relational roles. When attorneys are cast in the role of guide to the court, the sphere comprised of obligations relating to fairness and truth must expand, protruding over a somewhat shrunken sphere of obligation to the client, as shown in Figure 7.2: Duties to 3Ps and System

Duties to Clients loyalty & confidentiality

truthfulness & fairness

Rules against bribing or lying to a judge

INDEPENDENCE

Rules against representing opposing sides in same dispute

Figure 7.2  In this context, attorney independence from the client becomes necessary to keep attorneys focused on their role as guide. As can already be anticipated, the spheres are drawn quite differently for US attorneys and, in the redrawing, the nature of the duty of independence shifts as well. b.  Role and ethics in the US model 7.48 In contrast to these civil law arrangements, procedures in the American legal system are built on a model of party contest before a ‘judicial tabula rasa’.112 The American judge (or jury) is supposed to obtain only through the party dialectic all evidence that must be evaluated and legal arguments that must be analysed,113 and they are expected to remain completely neutral until it is time to render the final judgment.114 7.49 As a consequence of the relatively passive role of decision-makers, attorneys are given an

active role in managing the proceedings. The attorney in US litigation gathers evidence for the client’s case, primarily through inquiries for documents and depositions directed at the opposing party. Based on this work, the US attorney shapes the issues for trial and presents

by the presence of an adversary’. Monroe H. Freedman, ‘Our Constitutionalized Adversary System’, 1 Chap. L. Rev. 57, 79 (1998) (citing E. Allan Lind et al., ‘Discovery and Presentation of Evidence in Adversary and Nonadversary Proceedings’, 71 Mich. L. Rev. 1129 (1973). 112  See Damaška, The Faces of Justice and State Authority 138. 113  Professor Reitz characterizes the difference as that US judges ‘view themselves as umpires between the contending parties, rather than [as German judges] government officials responsible for determining the truth of the allegations’. John C. Reitz, ‘Why We Probably Cannot Adopt the German Advantage in Civil Procedure’, 75 Iowa L. Rev. 987, 992 (1990). 114  Reitz, ‘Why We Probably Cannot Adopt the German Advantage in Civil Procedure’ 992.

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A theory of professional ethics evidence at trial, including developing expert testimony and examining and cross-examining witnesses. Because the judge only rules on pre-trial motions that are brought by the parties, attorneys act not as guides, but primarily as clients’ strategists, evaluating and advising when and how various procedural tactics should be used.115 This understanding of the judge’s role in the trial process illuminates why a US judge’s impar- 7.50 tiality may be called into question for asking too many questions of a party’s witness,116 or for expressing opinions during the proceedings about the relative merits of the parties’ cases. Such questions or comments would remove the judge from a position of total detachment and inject him or her into the attorney’s process of developing and presenting the client’s case. It also explains why US prohibitions against ex parte communications are more absolute than in civil law systems—because the decision-maker is expected to be a blank slate on which the parties, in heated contest, draw their dispute, and any stray renderings by one party might unfairly alter the tableau.117 On the other hand, because US judges have express law-making and policy-creating func- 7.51 tions, it is necessary to have their selection and appointment determined through a political process, namely appointment of federal judges by the President with the advice and consent of the Senate.118 For this reason, American notions of judicial impartiality may be more tolerant of the effects of ‘Politics’ with a capital ‘P’ than ‘politics’ with a lower case ‘p’,119 the latter of which may be more prevalent in civil law countries as a result of the institutional pressure from more senior judges.120 Unapologetically politicized decisions may injure perceptions of the legitimacy of US judges,121 but the level of political neutrality embodied in conceptions of the political impartiality of judges in the United States is less than that 115  Reitz, ‘Why We Probably Cannot Adopt the German Advantage in Civil Procedure’ 992 (footnotes omitted). 116  There are many cases in the United States in which arbitrators have been challenged on the grounds of bias or misconduct based on aggressive questioning of witnesses. Compare In Matter of Arbitration between Cole Publ’g Co., Inc. v John Wiley & Sons, Inc., 1994 WL 532898, *2 (S.D.N.Y. 29 Sept. 1994) (rejecting challenge to arbitral award that alleged arbitrator bias was evidenced by aggressive questioning of some witnesses and attempts to rehabilitate others, and that arbitrator acted more as an advocate than an impartial moderator), with Holodnak v Avco Corp., 381 F. Supp. 191 (D. Conn. 1974), aff’d in part, rev’d in part on other grounds, 514 F.2d 285 (2d Cir. 1975) (finding bias and vacating arbitral award based on arbitrator’s ‘badgering’ the complaining party at the time of the proceedings). 117   Rogers, ‘Fit and Function in Legal Ethics’ 392. 118   ‘[T]‌he Senate can serve as an important political check on the President’s power to appoint. Moreover, the political nature of the Senate’s role, like that of the President, helps ameliorate the “countermajoritarian difficulty.” ’ Henry Paul Monaghan, ‘The Confirmation Process: Law or Politics?’ 101 Harv. L. Rev. 1202, 1203 (1988); see also Richard D. Manoloff, ‘The Advice and Consent of the Congress: Toward a Supreme Court Appointment Process for Our Time’, 54 Ohio St. L.J. 1087, 1102 (1993) (arguing that aggressive Senate review of presidential nominees may provide a valuable political check on judicial appointments). 119   This preference is most clearly expressed in the Public Litigation Model. While Fiss argues that judicial independence is necessary to protect fundamental rights, he simultaneously demands certain political inclinations of judicial decision-makers. See Owen Fiss, ‘The Supreme Court, 1978 Term-Foreword: The Forms of Justice’, 93 Harv. L. Rev. 1, 43–4 (1979). 120   Professor Koch reasons that the structure of the civil law judiciary, and particularly the vesting of both promotion and disciplinary decision-making in the hands of senior judges, may encourage junior judges to conform or ‘bias’ their decision-making to conform to the perceived preferences of senior judges. See Charles H. Koch, Jr., ‘The Advantages of the Civil Law Judicial Design as the Model for Emerging Legal Systems’, 11 Ind. J. Global Legal Stud. 139, 143–4, 147 and nn. 16 and 28 (2004). 121  As dissenting Justices Ginsburg, Breyer, and Stevens commented in their dissent to the majority opinion in Bush v Gore, ‘[a]‌lthough we may never know with complete certainty the identity of the winner of this year’s Presidential election, the identity of the loser is perfectly clear. It is the Nation’s confidence in the judge as an impartial guardian of the rule of law’. Bush v Gore, 531 U.S. 98, 128–9 (2000) (Stevens, J., dissenting).

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Ariadne’s Thread and the Functional Thesis expected of ordinary civil law judges. In civil law systems, judicial selection and promotion processes confirm that the position of judge is regarded more as a technical vocation than a political activity.122 7.52 The more staunchly partisan role of US attorneys can also be seen as linked to the nature of

common law legal methodology and the judge’s decisional role in relation to that methodology. The common law judicial decision is predicated on the ‘mosaic of facts and circumstances presented in their unicity with each case’.123 The task of a common law judge is to evaluate counsel’s competing arguments about hyper-factual analogies and subtle distinctions in prior decisional law.124 The view of each case as presenting a unique scenario, combined with an inherent scepticism about the existence of any single right answer, amplifies the need for the common law judge to distance him or herself from the competing scenarios so that he or she can effectively evaluate them.125

7.53 While US judges (and juries) are comparatively passive in their fact-finding role, it is

readily acknowledged that US judges make law.126 Parties go to court, therefore, not only seeking resolution of an individual dispute, but potentially to effectuate changes in the law.127 When judges have the power to make law, the role of the advocate expands from that of strategist who can represent the client’s cause under existing law, to that of strategist (particularly in class and aggregate litigation) and lobbyist, who can urge potential changes in the law. 122   Notably, concern over political accountability does affect judicial selection in civil law countries for those judges whose functional role includes invalidating unconstitutional legislative decision-making. For example, Article 94(1) of the German Basic Law requires that half of the judges of the Federal Constitutional Court are elected by the Bundestag and half by the Bundesrat, and pursuant to Article 56 of the French Constitution, one-third of the French Cour di Cassassion are appointed by the President of the Republic, one-third by the President of the National Assembly, and one-third by the President of the Senate. These and other judicial selection processes are described in Gustavo Fernandes de Andrade, ‘Comparative Constitutional Law: Judicial Review’, 3 U. Pa. J. Const. L. 977, 986–7 (2001). 123   Curran, ‘Romantic Common Law, Enlightened Civil Law’ 100. 124   As one comparative law scholar explains: Common-law lawyers . . . fashion their arguments from a close study of prior cases. Their success as lawyers depends on persuading the judge in each case of the accuracy of the analogies they suggest between their client’s situation and that of the precedents they cite . . . and the [distinctions] from situations that arose in the precedents they hope to distinguish. The common-law lawyer’s task also is to persuade the judge that the lawyer’s interpretation of existing case law accurately reflects prevailing contemporaneous legal standards, and that the accumulated body of relevant precedents obliges the judge to rule in favor of the lawyer’s client. . . . Thus, common-law lawyers engage in complex factual triages, distinguishing as factually different and distant those cases whose outcomes would militate against their client’s interests. . . Curran, ‘Romantic Common Law, Enlightened Civil Law’ 76–77. 125  Historically, modern concerns about impartiality can be traced to the emergence in the seventeenth century of doubt about the ability or at least difficulty to reach ‘an objectively correct legal decision’, which caused people to go ‘to greater lengths to prevent extraneous motives from inhibiting the delicate feat’. Leubsdorf, ‘Theories of Judging and Judge Disqualification’ 249 (citing Barbara Shapiro, Probability and Certainty in Seventeenth Century England (Princeton, 1983) 190–1). 126   See Alexander M. Bickel, The Least Dangerous Branch: The Supreme Court at the Bar of Politics (Yale, 1962) 16–23 (arguing that judges make law even though they are not elected or constrained in the same way legislatures are). 127   See generally Guido Calabresi, A Common Law for the Age of Statutes (Harvard, 1982) (arguing that the structure of the courts and the nature of the common law makes them better suited to resolve some policy issues than the legislature); Thomas W. Merrill, ‘Does Public Choice Theory Justify Judicial Activism After All?’ 21 Harv. J.L. & Pub. Pol’y 219 (1997) (suggesting that courts provide less expensive access to government than direct lobbying of the legislature).

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A theory of professional ethics This understanding of the role of judges, juries, and attorneys is, to American lawyers and 7.54 judges, so obvious that it is sometimes difficult for them to imagine that any other regime could properly function. Fuller, and even some more recent scholars, for example, have expressed doubt that a judge in a so-called inquisitorial system could be impartial. Fuller and his co-author John Randall explain: Any arbiter who attempts to decide a dispute without the aid of partisan advocacy . . . must undertake not only the role of judge, but that of representative for both of the litigants. Each of these roles must be played to the full without being muted by qualifications derived from the others. When he is developing for each side the most effective statement of his case, the arbiter must put aside his neutrality and permit himself to be moved by a sympathetic identification sufficiently intense to draw from his mind all that it is capable of giving . . . When he resumes his neutral position, he must be able to view with distrust the fruits of this identification and be ready to reject the products of his own best mental efforts. . .128

The conceptual flaw in Fuller’s analysis is that he defines the judicial role as contingent on US-style partisan advocacy. By assuming that the definition of judicial impartiality is the same across systems, Fuller 7.55 critiques the inquisitorial or civil law model for not properly accommodating a definition that is inconsistent with the role assigned to judges in civil law systems.129 As David Luban explains, Fuller ‘is presupposing that the enquiry proceeds best by unmuted adversary presentation, in which case, of course, an inquisitorial investigation becomes by definition a mere copy of the real thing’.130 One of the primary benefits of comparative legal analysis is that it can reveal to us our 7.56 own unacknowledged and hidden assumptions.131 Here, however, Fuller has succumbed to one of the most common hazards of comparative analysis. Fuller assumes that there is a universal definition of judicial impartiality, or more precisely that the US definition should apply in other systems.132 By erroneously concluding that judicial impartiality is impossible in the absence of ‘partisan advocacy’, Fuller fails to recognize that selecting particular

128   Lon L. Fuller and John D. Randall, ‘Professional Responsibility: Report of the Joint Conference’, 44 A.B.A. J. 1159, 1160 (1958), quoted in Luban, ‘Rediscovering Fuller’s Legal Ethics’ 821. 129   See Luban, ‘Rediscovering Fuller’s Legal Ethics’ 821 (‘What Fuller claims is psychologically impossible turns out to be daily practice in civil law systems.’). 130   See Luban, ‘Rediscovering Fuller’s Legal Ethics’ 822. 131   See Catherine A. Rogers, ‘Gulliver’s Troubled Travels, or The Conundrum of Comparative Law’, 67 Geo. Wash. L. Rev. 149, 182–3 (1998). 132  As David Luban has explained in his more elaborated exposition on Fuller’s theories, ‘we can agree with [Fuller] that an adjudication should include all points of view without conceding that each point of view should be spin-doctored by an advocate to advance a party’s interest’. See Luban, ‘Rediscovering Fuller’s Legal Ethics’ 826; see also Bone, ‘Lon Fuller’s Theory of Adjudication’ 1307, n. 126 (describing Fuller’s conception of how the ‘process of partisan advocacy is likely to push lawyers in the direction of viewing their role, not in terms of persuasion or manipulation of doctrine, but instead in terms of “conveying to the court that full understanding of the case which will enable it to reach a wise and informed decision” ’) (citing Lon L. Fuller, ‘Philosophy for the Practicing Lawyer’, in Kenneth I. Winston (ed.), Introduction to the Principles of Social Order (Duke, 1981) 282, 289–90). There are those who might contend, on the other hand, that Fuller’s hypothesis is supported in social scientific research that indicates that an ‘opponent of an adversarial lawyer transmits more facts that are unfavorable to her own client’, apparently induced to candour by the presence of an adversary. See Monroe H. Freedman, ‘Our Constitutionalized Adversary System’, 1 Chap. L. Rev. 57, 79 (1998) (citing E. Allan Lind et al., ‘Discovery and Presentation of Evidence in Adversary and Nonadversary Proceedings’, 71 Mich. L. Rev. 1129, 1136 (1973)).

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Ariadne’s Thread and the Functional Thesis characteristics, such as partisan advocacy in the US legal system,portends the results of comparison with other systems.133 To borrow Professor Andrew Huxley’s poignant illustration of this classical problem, the comparison of chalk with cheese necessarily will highlight the question of edibility, while a comparison of chalk with pens will focus on legibility.134 By taking partisan advocacy as his starting point for determining judicial impartiality, Fuller fails to adequately define the role of the civil law judge prior to delineating his or her impartiality obligations. Paradoxically, this omission is contrary to Fuller’s own prescription for how ethical norms should be developed.135 7.57 When the definition of the civil law judge’s role in relation to the other actors in his or

her legal system is properly illuminated—as opposed to being presumed by the shadow of US-style partisan advocates—the distinctive features of the civilian judge’s impartiality obligations become more clear and comprehensible. Going back to the US system, where attorneys are cast as strategists and lobbyists for their clients, the sphere of obligation to clients must be more imposing to accommodate the expansion of this role, as depicted in Figure 7.3: Duties to 3Ps and System

Duties to Clients

truthfulness & fairness loyalty & confidentiality

Rules against bribing or lying to a judge

INDEPENDENCE

Rules against representing opposing sides in same dispute

Figure 7.3  Under this model, the obligations to the State and the system are partially overshadowed,136 and independence shifts to become a mechanism primarily aimed at maintaining distance from the State. 133  For an extended discussion of the methodological problems raised in comparative law, see Rogers, ‘Gulliver’s Troubled Travels’ 162. 134  Andrew Huxley, ‘Golden Yoke, Silken Text’, 106 Yale L.J. 1885, 1924–5 (1997). The problems illustrated by Huxley’s example are exacerbated in comparing principles, rules, procedures, and doctrines instead of tangible and relatively simple objects, such as chalk and cheese. Legal rules, principles, and procedures exist in the larger context of a legal system’s framework. See Rogers, ‘Gulliver’s Troubled Travels’ 161–2 and n. 62. 135  See David Luban, ‘Rediscovering Fuller’s Legal Ethics’, 11 Geo. J. Legal Ethics 801, 807 (1998); Lon L. Fuller, ‘The Philosophy of Codes of Ethics’, 1995 Elec. Eng. 916, 917 (1955). 136  Daly, ‘The Dichotomy Between Standards and Rules’ 1262–63 (noting that ‘the Preamble to the [US] Model Rules emphasizes a lawyer’s obligation to the client’ in contrast to ‘the Preamble to the CCBE Code . . . [which] emphasizes a lawyer’s obligation to society’).

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A theory of professional ethics c.  Ethical obligations in comparative perspective The models and the roles of various actors described earlier are the frameworks that portend 7.58 the specific content of national ethical rules. Beginning with the rule about pre-testimonial communication, if witnesses are presented by one party as part of its case,137 it seems perfectly reasonable, subject to certain limitations, to permit attorneys to discuss the case with witnesses before they testify. In fact, it is really necessary in order for the litigants to be able to prepare their case. On the other hand, civil law systems could be expected to preclude attorneys from speaking to witnesses because the court is assigned the role of fact gathering and the advocate’s function is primarily to guide the court in that process.138 In that context, an attorney would be intruding on the province of the court if the attorney tried to discuss with the witness the facts of the case.139 Because there is no pre-trial exchange directly between parties, European civil procedure rules specify that there is no obligation by parties or counsel to provide information to assist an opposing party’s case.140 On the other hand, as described in Chapter 3, civil law jurisdictions generally vest attorneys with 7.59 much greater discretion on delicate issues involving their own conflicts of interest.141 This willingness to defer may reflect confidence in the professional independence that attorneys are expected to maintain from their clients. Prior to the adoption of the Council of Bars and Law Societies of Europe (CCBE) Code, individual lawyers’ professional independence was considered sufficient justification for leaving conflicts of interest solely as a matter of an attorney’s personal relationship with the client.142 Similarly, when advocates act as ‘guide’ to the court, as in civil law systems, there is less concern that extrajudicial information will endanger the validity of the result, which explains the more relaxed ethical standards regarding ex parte communication in civil law systems.143 137   The US system stops short of treating witnesses as classical Rome did, expecting them not only to describe facts of the case, but also to express solidarity with, and advocate on behalf of, one party. See Damaška, The Faces of Justice and State Authority 28. While US witnesses do not technically ‘belong’ to one party, US attorneys approach litigation with a ‘proprietary concept of evidence’. See Mirjan Damaška, ‘The Uncertain Fate of Evidentiary Transplants: Anglo-American and Continental Experiments’, 45 Am. J. Comp. L. 839, 845 (1997). The formal status of witnesses as ‘neutral’ has little practical effect, except that it is used as a basis for opposing efforts by parties to prevent their opposition from speaking to non-party witnesses. See Wolfram, Modern Legal Ethics, § 12.4.3, 647. 138   Langbein, ‘The German Advantage in Civil Procedure’ 864; see also Reitz, ‘Why We Probably Cannot Adopt the German Advantage in Civil Procedure’ 994 (‘American courts could only adopt the German rule discouraging pretrial contact with witnesses by changing our cultural definition of the lawyer’s role.’). 139  The reason why there is no apparent obligation for an attorney to report client perjury or intent to commit perjury is that Continental systems distinguish sharply between the role of a party and that of a witness. Parties to an action are rarely permitted to testify because that would force the dubious choice between testifying against their own interest and perjuring themselves. See Damaška, ‘The Uncertain Fate of Evidentiary Transplants’ 842. The rarity of party testimony is probably responsible for the lack of attention to attorney obligations regarding client perjury. 140  Nicolò Trocker, ‘Transnational Litigation, Access to Evidence, and U.S. Discovery’, in R. Stürner and M. Kawano (eds.), Current Topics of International Litigation (Mohr Siebeck, 2009) 146, 156 (‘[European] codes of civil procedure of the 19th century strictly adhered to the principle nemo tenetur edere contra se, i.e. the principle that no party has to help her opponent in her/his enquiry into the facts.’). 141  See paras 3.55–3.63. 142  See ‘International Law Practice in the 1990s: Issues of Law, Policy, and Professional Ethics’, 86 Am. Soc’y Int’l L. Proc. 272, 283 (1992). European lawyers may have added incentives to interpret these restrictions narrowly because they do not have the opportunity to seek client waiver and their decision cannot be challenged by a motion for disqualification, as is the American practice. 143  Compare Wolfram, Modern Legal Ethics, § 11.3.3, 604–06 (purpose of prohibition against ex parte communications with judge is to prevent communicating party from gaining unfair advantage), with Langbein, ‘The German Advantage in Civil Procedure’ 830 (describing how under German procedure the judge is not expected to be simply an impartial adjudicator, so there is little concern that improper influence will be exerted on or by the parties or that information communicated ex parte will endanger the validity of the result).

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Ariadne’s Thread and the Functional Thesis 7.60 By contrast, when advocates are cast in the role of strategist and lobbyist for the client, it is less

plausible and less desirable for them to maintain a detached independence from the client. Instead, client confidences take on a new level of importance and necessarily heightened loyalty obligations make even attenuated conflicts of interest impermissible, at least in the absence of client consent.144 Communication with the client is essential and withholding important communications from a client, such as required under the French doctrine ‘sous la foi du Palais’,145 would interfere with representation. In their role as lobbyist, creative, aggressive argumentation is more tolerable and may be regarded as necessary. Independence from State institutions, including the courts, meanwhile, becomes all the more important.

7.61 While these broad outlines are helpful, it is also important to acknowledge that the labels do

not always accurately reflect the value assigned to particular obligations. Elevating ethical obligations that are necessary to fulfil functional features of an attorney’s role necessarily implies discounting or diminishing competing ethical norms. Acknowledging the trade-off among ethical virtues can seem awkward since ethics are most often discussed as moral absolutes. When, for example, is it OK to be untruthful? When can an attorney righteously betray a client’s loyalty? The result of this awkwardness is that ethical discourse within particular legal systems can become something of a shell game to obscure the costs of particular ethical trade-offs.

7.62 The most obvious example of this phenomenon is the US system, which as discussed pre-

viously, procedurally necessitates augmented obligations of loyalty to the client, and as a result diminishes obligations to the court, third parties, and the legal system. To offset this inflated commitment to the client’s objectives, the attorney’s role as ‘officer of the court’ is often given an exalted rhetorical dignity to act as an ‘ethical stabilizer’ and counterbalance, at least rhetorically, the role of zealous advocate.146 By contrast, in jurisdictions where the court system is used as a forum for advancing governmental policies, as opposed to a wholly independent check on the government, ‘the professional ethic now counteracts pressures reflecting the idea that aggregate state interests must always prevail over narrow individual interests of the client . . . and the dignity of acting on behalf of a private individual enmeshed in the machinery of justice is likely to be glorified’,147 at least rhetorically as an ethical ideal. This glorification of the lawyer as the individual’s legal champion may be seen as on the rise in places like China, even as the Chinese government imposes significant pressures on individual attorneys, particularly in criminal and human rights cases, most significantly by requiring an oath of loyalty to the Communist Party.148

7.63 Ultimately, these differing roles assigned to attorneys reflect the larger cultural values of

the societies that produced them. Using very broad brushstrokes to render the opposing scenes, it has been argued that the greater authority of civil law judges reflects in German

144  For a discussion of contrasting approaches to conflicts of interest in civil and common law systems, see paras 3.55–3.68. 145  Under this doctrine, an attorney who received a communication from opposing counsel with this designation must maintain the communication as confidential and is even prohibited from sending copies to his or her own client. See para. 7.60. 146 Damaška, The Faces of Justice and State Authority 143. 147 Damaška, The Faces of Justice and State Authority 143–4. 148  According to commentators, lawyer ethics in China are evolving from being ‘a state legal worker affiliated with the state-owned Office of Legal Advisor to being a legal practitioner authorized by clients or assigned by institutes to represent them; and reporting an increase in loyalty to the client in the Chinese legal profession’. Jack P. Sahl, ‘Forward: The New Era—Quo Vadis?’ 43 Akron L. Rev. 641 (2010).

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A theory of professional ethics society a greater acceptance of authority and less tolerance for uncertainty.149 Meanwhile, the expanded control of parties in US proceedings, and the consequent role of the US attorney as strategist and lobbyist, are said to be linked to the American commitment to individualism and an exaltation of due process over efficiency and objectivity in the fact-gathering process.150 The political values of particular societies and their effect on their legal systems and proce- 7.64 dural choices, is a topic that can and has been extensively tested and debated elsewhere.151 The discussion of these issues in this work is necessarily a reductionist distillation of this body of literature, and cannot take full account of historical influences and anomalies. For example, the notion that German society’s preference for order and deference to authority is reflected its civil law tradition may not be generalizable to Italy, another prominent civil law jurisdiction that borders Germany. Anyone who has driven on Italian roads has undoubtedly noticed that Italians appear to have an extraordinarily high tolerance for uncertainty—and even chaos—at least regarding the rules of the road. In addition, the strongest versions of the civil law ideal-type does not necessarily translate well to large commercial settings where there are high stakes and sophisticated lawyers are more proactive.152 It is also true that procedural cross-pollination has introduced procedural reforms into various systems that blur the outlines of the stark ideal-types described.153 The simplified summary is intended only to indicate, in the broadest of outlines, that there is 7.65 a causal relationship between cultural and political values, on the one hand, and procedural choices on the other. Acknowledging this link, even only at the level of generality described here, provides a basis for the primary insight of the Functional Thesis that ethical obligations are determined by roles, which are in turn determined through procedural choices. This analysis challenges traditional views that legal ethics derive directly from cultural preferences such that neutral international rules are impossible. While cultural and political values affect legal ethics, those values do not directly produce the ethical rules but are instead mediated   See Chase, ‘Legal Processes and National Culture’ 19.   By maximizing the role of partisans who have obvious incentives to distort the truth in favour of their personal interests and by permitting parties to be witnesses on their own behalf, the US litigation model arguably prioritizes litigants’ right to a ‘day in court’ over the accuracy of the ultimate result. See Damaška, The Faces of Justice and State Authority 11; Chase, ‘Legal Processes and National Culture’ 19 (arguing that legal culture in Germany is more comfortable with authority, while in the American system the legal culture emphasizes party autonomy over the process as an expression of individualism and a commitment to due process); Jerold S. Auerbach, Justice Without Law? (Oxford University Press, 1983) 10 (arguing that ‘the dominant ethic [of American Society] is competitive individualism’ and linking that ethic to US legal institutions and processes). 151  For a summary of sources in this debate, see Chase, ‘Legal Processes and National Culture’ nn. 41–42. 152  See Geoffrey C. Hazard and Angelo Dondi, ‘Responsibilities Of Judges And Advocates In Civil And Common Law: Some Lingering Misconceptions Concerning Civil Lawsuits’, 39 Cornell Int’l L.J. 59 (2006) (‘[I]‌n commercial litigation, this traditional contrast seems at least misleading, especially considering that the parties are generally sophisticated in business affairs, have real disputes about substantial and material matters, and tend to employ experienced advocates to represent them.’). 153  See, e.g., Linda S. Mullenix, ‘Lessons from Abroad: Complexity and Convergence’, 46 Vill. L. Rev. 1, 5 (2001) (‘[P]‌articularly in the realm of complex litigation, the American managerial judge has undertaken roles that are indeed converging with the civil law inquisitorial judge.’); Richard L. Marcus, ‘Reining in the American Litigator: The New Role of American Judges’, 27 Hastings Int’l & Comp. L. Rev. 3, 29–30 (2003) (noting that some countries ‘may be gravitating toward developments in litigation that make it more like America’s . . . [including] Japan [where] there is now some opportunity to do discovery; [meanwhile,] American procedure’s movement toward “greater judicial control over proceedings” makes it appear that “America is falling in line with the rest of the world”, though “there is likely still to be a gulf between the reality of the American lawyer and the experiences of lawyers elsewhere” ’). 149 150

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Ariadne’s Thread and the Functional Thesis through the procedural arrangements of particular adjudicatory systems.154 These insights provide guidance for prescriptive efforts to create new ethical standards for international arbitration, which is the subject of the next section.

B.  The Functional Thesis as a prescriptive tool 7.66 Until this point, this chapter has used the Functional Thesis to explain why different national

systems have adopted different ethical rules. This section examines the Functional Thesis as a prescriptive tool for developing ethical norms for international arbitration. While efforts have already been undertaken to draft such codes, as explored in Chapters 2, 3, and 6, those efforts have largely been the product of pragmatic horse-trading or distillation of existing practices. These efforts have yielded some salutary results, but the absence of a coherent theory or methodology has left some questions unanswered or seemingly unanswerable. A coherent theory and methodology for developing ethics for international arbitration will facilitate debates over the appropriateness of particular rules. It will also lay the groundwork for a more comprehensive and autonomous ethical regime for international arbitration that is, as argued in Chapter 6, independent from national ethical regimes. 1.  The Functional Thesis in international arbitration

7.67 As a prescriptive tool, the aim of the Functional Thesis is not to resolve conflicts among dif-

ferent national ethical rules, but to aid in development of ethics specifically for international arbitration. To that end, the Functional Thesis requires identification of the inter-relational functional roles of actors in international arbitration, meaning those roles that are assigned by the procedural arrangements of international arbitration and that reflect the underlying ‘cultural and political values’ of international arbitration.

7.68 At first blush, the dictates of the Functional Thesis seem difficult to apply to international

arbitration. What are the ‘cultural values’ or even more perplexing the ‘political values’ of international arbitration? International arbitration exists between cultural boundaries. It is explicitly intended to fuse multiple, diverse legal cultures, and transcend the politics that can hinder national adjudication of international disputes. It is a system of dispute resolution without geographic borders or a discernible citizenry.155 Increasing cultural diversity is one reason why new ethical guidance is needed, so how can cultural or political values in such a heterogeneous system be identified, let alone inform development of ethical norms?

7.69 Another challenge in applying the Functional Thesis is the procedural flexibility that is the

hallmark of international arbitration. Instead of settled procedural arrangements similar to national court rules, institutional arbitral rules only provide skeletal procedures that address primarily commencing arbitration and selecting arbitrators.156 Beyond these basics, arbitral

154  Even in moral philosophy, ethics cannot be analysed independently of social context. ‘[E]‌very moral philosophy offers explicitly or implicitly at least a partial conceptual analysis of the relationship of an agent to his or her reasons, motives, intentions, and actions, and in so doing generally presupposes some claim that these concepts are embodied or at least can be in the real social world.’ Alasdair MacIntyre, After Virtue: A Study in Moral Theory, 2d edn. (Notre Dame, 1984) 23. 155  See paras 1.24–1.34. 156  See John M. Townsend, Overview and Comparison of International Arbitration Rules (Litigation and Administrative Practice Course Handbook Series, Practicing Law Institute, 2000) 817.

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The Functional Thesis as a prescriptive tool rules are generally silent with regard to the actual proceedings, including such fundamentals as whether hearings will be held.157 How can these sketchy outlines of procedural rules guide us in understanding the role of attorneys needed under the Functional Theory to identify relevant ethical obligations that are consistent with that role? Notwithstanding these questions and the open texture of international arbitration, there 7.70 is in fact substantial guidance for formulating ethical obligations for its participants. The starting point for this analysis is the structural, normative goals of international arbitration. a.  The normative goals of international arbitration The first challenge in applying the Functional Thesis in international arbitration is to deter- 7.71 mine an appropriate analogue for cultural and political values that are the starting point in national regimes. Commentators often refer to an ‘international arbitration culture’, but the content and even proof of existence of such a culture is elusive.158 Some commentators have attempted to define international arbitration’s ‘culture’ by relying on the hybridized procedures that typify international arbitral proceedings.159 This approach to defining culture, at least for an adjudicatory regime, is somewhat inverted. As examined previously, in national legal systems, procedural arrangements are distilled from a system’s cultural and political values. Procedures, in other words, may reflect and reinforce the culture on which they are premised, but they do not in themselves establish that culture. Given the difficulties in identifying a fixed ‘culture’, for the purposes of applying the Functional 7.72 Thesis in international arbitration, it makes more sense to identify the normative goals of international arbitration. Just as with national cultural values,160 the normative goals of international arbitration undergird and reflect the structure of procedural arrangements in international arbitration. These goals can be distilled down to: transnational neutrality, effectiveness, and party autonomy. The primary accomplishment of international arbitration, and one of the primary reasons 7.73 why parties choose international arbitration, is that it ensures neutrality as between competing national cultural values that are manifest in the procedural regimes of their respective legal systems.161 Parties presume, rightly or wrongly, that the national courts of the opposing party

157  See, e.g., United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules, art. 15(2) (1977) (permitting arbitrators to determine whether to hold hearings in the absence of party request). 158 Karton, The Culture of International Arbitration 19–24. 159 Karton, The Culture of International Arbitration 23–24. 160  See Tom R. Tyler et al., ‘Cultural Values and Authority Relations: The Psychology of Conflict Resolution Across Cultures’, 6 Psychol. Pub. Pol’y & L. 1138 (2000) (describing the effect of values of a population on their relation to authority, particularly individual reactions to conflict resolution either based on its substantive outcomes or on its treatment of them in the process); Resnik, ‘Tiers’ 839 (elaborating the normative content of procedural rules in relation to the ‘valued features’ of US culture). 161  See, e.g., Gerald Aksen, ‘Arbitration and Other Means of Dispute Settlement’, in David N. Goldsweig and Roger H. Cummings (eds.), International Joint Ventures: A Practical Approach to Working with Foreign Investors in the U.S. and Abroad, 2nd edn. (1990) 287 (citing distrust of opponent’s national courts as primary motivation for resorting to arbitration). A recent survey of participants in international arbitration bears this hypothesis out. Of those surveyed, 72% identified ‘neutrality’ and 64% identified enforceability as ‘highly relevant to their decision to arbitrate’. See Christian Bühring-Uhle, Arbitration and Mediation in International Business (Kluwer Law International, 1996) 45, cited in Christopher R. Drahozal, ‘Commercial Norms, Commercial Codes, and International Commercial Arbitration’, 33 Vand. J. Transnat’l L. 79, 95 n. 83 (2000). Other popular reasons were expertise available through arbitration (37%) and the unavailability of appeal (37%).

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Ariadne’s Thread and the Functional Thesis would be biased against them. To avoid the potentially biased national courts of their opponents, international businesspersons enter into agreements that prevent national courts from deciding the case and instead place decision-making power in the hands of an arbitral tribunal of their choice.162 By transferring substantive decision-making from national courts to a private arbitral tribunal, parties obtain a uniquely neutral forum for resolving their disputes.163 7.74 Another important goal of international arbitration is to ensure that disputes will be resolved

effectively. Because the exercise of judicial jurisdiction over foreign nationals is an exercise of coercive governmental power, and it reaches into the boundaries of foreign States,164 national court litigation of international private disputes often implicates issues of foreign national sovereignty and international comity.165 As examined in Chapter 6, the consequence is a range of ‘peculiar uncertainties’ in procedural matters, such as service of process, taking of evidence, enforcement of judgments, and the like.166 One of the most critical advantages of international arbitration over national court litigation, therefore, is that arbitral awards enjoy much higher rates of enforcement.167

7.75 To achieve the first two goals, neutrality and effectiveness, the modern international arbitra-

tion system strikes ‘an exceedingly fine balance between arbitral autonomy and minimum competence for national judicial review’.168 When the role of national courts is reduced to ensuring that minimal procedural requirements are observed and critical public policies are protected, the effect is elimination of substantive appeal based on errors that arbitrators may make. These first two goals, neutrality and efficacy, mandate the third normative goal of international arbitration—party autonomy.169

7.76 To compensate for relinquishment of familiar judicial procedures and the right to appeal

the substance of arbitral awards, parties are given ex ante control over the arbitral process.

162   Until recently, the standard conception was that arbitration clauses ‘divested’ courts of jurisdiction. See, e.g., Philip J. McConnaughay, ‘The Risks and Virtues of Lawlessness: A “Second Look” at International Commercial Arbitration’, 93 Nw. U. L. Rev. 453, 473 (1999). More recently, this view has been called into question, particularly by the First Circuit: ‘The . . . modern view [is] that arbitration agreements do not divest courts of jurisdiction, though they prevent courts from resolving the merits of arbitrable disputes.’ DiMercurio v Sphere Drake Ins., PLC, 202 F.3d 71, 77 (1st Cir. 2000); see also Vimar Seguros y Reaseguros, S.A. v M/V Sky Reefer, 29 F.3d 727, 733 (lst Cir. 1994) (‘[A]‌n agreement to arbitrate does not deprive a federal court of its jurisdiction over the underlying dispute.’), aff’d, 515 U.S. 528 (1995); Morales Rivera v Sea Land of Puerto Rico, Inc., 418 F.2d 725, 726 (lst Cir. 1969) (holding that arbitration clauses are ‘not destructive of jurisdiction’). 163   See William W. Park, ‘Control Mechanisms in the Development of a Modern Lex Mercatoria’, in Thomas E. Carbonneau (ed.), Lex Mercatoria and Arbitration (1998) 143. 164   In the words of Alexander Hamilton, ‘An unjust sentence against a foreigner . . . would . . . be an aggression upon his sovereign as well as one which violated stipulations in a treaty or the general laws of nations.’ Clinton Rossiter (ed.), The Federalist No. 80 (1961), 476–7. 165  See Joseph F. Weis, Jr, ‘The Federal Rules and The Hague Conventions: Concerns of Conformity and Comity’, 50 U. Pitt. L. Rev. 903, 903 (1989) (analysing the sovereignty issues that are implicated and ‘pos[e]‌ substantial problems in transnational litigation’). 166  See Gary Born, International Commercial Arbitration (Kluwer, 2014) 66. 167  See W. Michael Reisman et al., International Commercial Arbitration: Cases, Materials and Notes on the Resolution of International Business Disputes (1997) 1215 (‘[A]‌rbitral awards as a whole enjoy a higher degree of transnational certainty than judgments of national courts.’); see also Saul Perloff, ‘The Ties that Bind: The Limits of Autonomy and Uniformity in International Commercial Arbitration’, 13 U. Pa. Int’l Bus. J. 323, 325 n. 11 (1992). 168  W. Michael Reisman, Systems of Control in International Adjudication and Arbitration: Breakdown and Repair (1992) 11–13. This balance is established by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. See Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 [hereinafter the ‘New York Convention’ or the ‘Convention’]. 169  Toby Landau, Composition and Establishment of the Tribunal, 9 Am. Rev. Int’l Arb. 45, 45 (1998) (‘It is often said that one of the central advantages of arbitration over litigation is the ability to choose one’s judge.’)

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The Functional Thesis as a prescriptive tool The parties create arbitral jurisdiction,170 select the arbitral tribunal,171 and determine the powers of the tribunal.172 Parties also have the opportunity to require that the tribunal follow certain procedures, which is the other touchstone for applying the Functional Thesis. The interplay between these three goals, like the ‘legal culture’ of national systems, is the background for procedural arrangements in international arbitration. They also provide essential background for application of the Functional Thesis to develop substantive ethical obligations. b.  Applying the Functional Thesis Particularly in light of the often informal, diffuse, and rapidly evolving nature of ethical 7.77 regulation in international arbitration, the Functional Thesis can provide a useful tool for sorting out the nature of that evolution, and resulting ambiguities and debates over substantive ethical standards. Take for instance the ethical norm, now well accepted in international arbitration, that it is acceptable for counsel to speak to a witness before the witness testifies.173 This ethical norm is often characterized as a harmonization of or compromise between common law and civil law traditions.174 But that explanation is not quite right. How exactly do you compromise or harmonize between being ethical and unethical? The Functional Thesis provides a more coherent analytic framework. What is harmonized is 7.78 not the ethical rules, but the procedures, which evolved to accommodate the normative goals of international arbitration. Under hybridized procedures, most often direct examination is usually submitted by the parties in the form of witness statements,175 and witnesses who 170   See Robert B. von Mehren, ‘Enforcement of Foreign Arbitral Awards in the United States’, (Litigation and Administrative Practice Course Series Handbook No. 579, Practicing Law Institute, 1998), 147, 152. 171   Most arbitral rules permit each party to select a ‘party arbitrator’, subject to objections by the opposing party about conflicts of interest. Once selected, the two party arbitrators then select a third arbitrator who will act as the ‘chairperson’ of the tribunal. The power to select the arbiter of the dispute is one of the most distinguishing features of arbitration and arguably the one that provides comfort enough for parties to relinquish their right to bring claims in their own courts. See Reisman et al., International Commercial Arbitration: Cases, Materials and Notes 541–72; see also V.S. Mani, International Adjudication: Procedural Aspects (Martinus Nijhoff Publishers, 1980) 16–17 (describing control over the composition of the tribunal as the ‘royal road’ that has lured sovereign nations into international adjudication). 172   Because the power of arbitrators derives from the arbitration agreement, arbitrators can only perform those powers delegated to them in the arbitration agreement. See Reisman et al., International Commercial Arbitration: Cases, Materials and Notes 1174–54. 173  See paras 3.32–3.47. 174  Kristen Weisenberger, ‘Peace is Not the Absence of Conflict: A Response to Professor Rogers’ Article “Fit and Function in Legal Ethics”’, 25 Wis. Int’l L. J. 89, 90, 123 (2007) (arguing that international arbitration ‘has effectively harmonized the ethical rules regarding pre-testimonial communication with witnesses’). Damaška, ‘The Uncertain Fate of Evidentiary Transplants’ 847 (arguing that if civilian systems introduced cross-examination, fairness would require at least some ‘minimal degree’ of witness preparation). Pre-testimonial communication is also necessary in international arbitration because witnesses are often physically located far from theplace of arbitration. Bringing them to arbitration, if they could indeed be compelled, would be uneconomical and unrealistic unless there is some knowledge beforehand about what they might be able to contribute to an understanding of the issues in dispute. See Nicolas C. Ulmer, ‘Ethics and Effectiveness: Doing Well by Doing Good’, in Geoffrey M. Beresford Hartwell (ed.), The Commercial Way to Justice: Institute of Arbitrators (1997) 179. 175  See Berthold Goldman, ‘The Application of Law: General Principles of Law—The Lex Mercatoria’ in Julian D.M. Lew (ed.), Contemporary Problems in International Arbitration (1986) 124. See also Alan Scott Rau and Edward F. Sherman, ‘Tradition and Innovation in International Arbitration Procedure’, 30 Tex. Int’l L.J. 89, 92 (1995) (‘[I]‌nternational arbitration hearings are often something of an amalgam of the two traditions, with witness testimony frequently presented in affidavit or summary-statement form, and, when live testimony is presented, with limited cross-examination.’); Christian Borris, ‘The Reconciliation of Conflicts Between Common Law and Civil Law Principles in the Arbitration Process’ in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration (1999) 13–14.

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Ariadne’s Thread and the Functional Thesis submit statements are generally cross-examined by counsel.176 During cross-examinations, arbitrators routinely interject limited questions, but more for the purpose of clarifying and filling in gaps in testimony, than developing the initial content of testimony.177 Some document exchange is usually allowed.178 7.79 These harmonized procedures promote two normative goals of international arbitration by

ensuring that procedures are neutral and by assuring the parties substantial ex parte control over presentation of evidence in their cases.179 Under the Functional Thesis, the interrelational functional roles that derive from these procedures determine a permissible range of ethical obligations to facilitate effective performance of these roles.

7.80 Separating functionally mandated professional obligations from the larger range of pos-

sible regulatiory options is helpful in clarifying ongoing ethical debates in international arbitration. On the one hand, those who oppose counsel regulation altogether would be hard pressed to deny the validity of functionally mandated obligations. They may argue that such obligations are so obvious, they need not be written down,180 or should not be formally enforced. But utilitarian arguments about how to best enforce ethical obligations are on very different ground once the essential function for the underlying obligation must be conceded.

7.81 On the other hand, the Functional Thesis also helps clarify what is at stake in debates over

development of new ethical standards. By clarifying which ethical obligations are functionally necessary, the Functional Thesis indirectly identifies those aspects of ethical debates that, not being strictly necessary, would be resolved by reference to cultural preferences or political negotiation. Some examples will help illustrate. 176  Andreas F. Lowenfeld, ‘Introduction: The Elements of Procedure: Are They Separately Portable?’ (1997) 45 Am. J. Comp. L. 649, 654 (‘By now, cross-examination by counsel is pretty well accepted in international arbitrations, and for the most part the continental lawyers have learned how to do it. Moreover, and almost as important, arbitrators have learned how to administer cross-examination. . .’); Julian D.M. Lew and Laurence Shore, ‘International Commercial Arbitration: Harmonizing Cultural Differences’ (1999) 54 Disp. Resol. J. 33, 34–35 (noting that when cross-examination is permitted in arbitrations, attorneys are encouraged, through strict time limits, to focus their questioning on the most important issues): Even with these accommodations, lawyers from different countries approach cross-examination with different purposes and techniques. English barristers are ‘accustomed to conducting a painstaking cross-examination of a witness’s statement’, and American attorneys cross-examine on materials from depositions and direct testimony in an effort to undermine the witness’s credibility. By contrast, Continental practitioners focus more on questions that might elicit new information, rather than on raising questions about the witness’s credibility. 177  See Rau and Sherman, ‘Tradition and Innovation in International Arbitration Procedure’ 96–97 (citing René David, Arbitration in International Trade (1985) 296); Bernardo M. Cremades, ‘Overcoming the Clash of Legal Cultures: The Role of Interactive Arbitration’ in Lew, Conflicting Legal Cultures in Commercial Arbitration 161; Ambassador Malcolm Wilkey, ‘The Practicalities of Cross-Cultural Arbitration’ in Lew, Conflicting Legal Cultures in Commercial Arbitration 81. 178  Some countries have national laws that limit the nature of and manner in which discovery can be pursued in arbitrations. For example, article 184 of the Swiss Federal Act on Private International Law requires that the arbitral tribunal itself take evidence. Bundesgesetz uber das Internationale Privatrecht vom (enacted 18 December 1987, amended 1 January 2007), BB1 1988 I  5 (Switz.) . Similarly, Section 1050 of the German Civil Procedure Code forbids arbitrators from ordering parties to disclose information and requires that they seek national court assistance in conducting discovery. See Code of Civil Procedure (promulgated 5 December 2005, amended 24 September 2009) § 1050 (Ger.) . 179  See Rau and Sherman, ‘Tradition and Innovation in International Arbitration Procedure’ 92. 180  See paras 6.01–6.03.

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The Functional Thesis as a prescriptive tool Going back to the well worn example of pre-testimonial witness communication, the func- 7.82 tional roles for counsel described earlier necessarily imply that they must be ethically allowed or even required to speak with witnesses and potential witnesses, both to obtain information and to prepare witnesses for what to expect on cross-examination.181 The participation of attorneys in exchange of documents, meanwhile, also implies some minimal obligations to facilitate that exchange. At a minimum, for these procedures to operate fairly, an attorney would be obliged to refrain from advising a client to destroy all critical documents to avoid having to produce them. They would also necessarily render inapplicable the traditional civil law doctrine of nemo tenetur edere contra se.182 The International Bar Association Rules on the Taking of Evidence in International 7.83 Arbitration (IBA Evidence Rules) appear to have intuited both the relationship between procedures and ethics, and the limits of what ethical prescriptions can be derived from procedural rules themselves. In their original versions, Article 4(3) of the IBA Evidence Rules provided only that ‘[i]‌t shall not be improper for a Party, its officers, employees, legal advisors or other representatives to interview its witnesses or potential witnesses and to discuss their prospective testimony with them’.183 When Article 4(3) was revised in 2010, the drafters sought to provide additional guidance by adding that parties could also ‘discuss their prospective testimony with [witnesses]’. The IBA Evidence Rules indicated that ‘interviews’ were not ‘improper’. They failed to 7.84 specify the exact nature of such interview, and indeed greater guidance was surely needed.184 The Functional Thesis, however, does not necessarily mandate the more specific rule. The comments to Guideline 24 of the IBA Guidelines for Party Representatives in International Arbitration (IBA Guidelines for Party Representatives), meanwhile, provided greater precision, specifying not only interviews but rehearsal of testimony is permitted. Various practical considerations may have led to this rule, including the dominance of US law firms in international arbitration practice. But strictly speaking, the ultimate permissiveness of Guideline 24 is more the product of a political choice than a functionally mandated obligation.185 Similarly, critics have challenged the Guidelines for Party Representatives as imposing 7.85 unnecessary obligations regarding preservation of documents and document exchange.186 A partial answer to these critics is that some obligations on counsel are in fact necessary to

  Damaška, ‘The Uncertain Fate of Evidentiary Transplants’ 847.   See note 140. 183  See International Bar Association Rules on the Taking of Evidence in International Commercial Arbitration, Art. 4.3 (1999). 184  See International Bar Association Rules on the Taking of Evidence in International Commercial Arbitration, Art. 4.3 (2010). 185  See paras 3.32–3.38. Under some readings, it may be regarded as even more permissive than some US jurisdictions. 186  Michael Schneider, ‘President’s Message: Yet another opportunity to waste time and money on procedural skirmishes: The IBA Guidelines on Party Representation’, 31:3 ASA Bull. 497, 498 (2013) (arguing that ‘one would have thought that there was no need to regulate [document exchange and disclosure] also in the Party Representation Guidelines’). 181 182

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Ariadne’s Thread and the Functional Thesis facilitate document exchange under hybridized procedures. For the IBA Evidence Rules or other informal document exchange procedures to operate fairly and effectively, attorneys cannot advise clients, intentionally and with ethical impunity, to destroy critical documents in order to avoid having to produce them later. That minimal obligation and some related obligations to participate and advise clients in document production are arguably necessary for attorneys to fulfil the functional role assigned to them. The full range of obligations specified in the IBA Guidelines for Party Representatives, however, are not similarly essential to the attorney’s functional role. They are, in the absence of functional necessity, more accurately understood as the product of a cultural or political choice. i. The Functional Thesis and party-appointed arbitrators 7.86 Another area in which the Functional Thesis provides important guidance is with respect

to the ethical obligations of party-appointed arbitrators. Although both party-appointed arbitrators and those presiding over tribunals are called ‘arbitrators’, analysis under the Functional Thesis reveals that they are in fact performing somewhat differentiated functional roles. Most national arbitration laws and arbitral rules implicitly or explicitly impose on all members of arbitral tribunals identical obligations of impartiality, independence, or neutrality.187 Under the Functional Thesis, variations in the functional roles of partyappointed and arbitral chairpersons necessarily imply at least some distinctions in their ethical obligations.

7.87 As examined previously with regard to the role of adjudicators generally,188 one of the pri-

mary determinants for the role of an adjudicator in a particular system is the process for appointment. Chapter 2 provided an overview of the procedures and criteria for selecting party-appointed arbitrators, and how they differ significantly from those for selecting arbitral chairpersons. To recap, in selecting arbitrators, parties generally engage in extensive research to determine potential arbitrators’ background, experience, decisional history (to the extent available), legal and cultural background, and the like. They often also interview prospective party-appointed arbitrators, but not arbitral chairpersons.

7.88 These procedures are a means of ensuring that party-appointed arbitrators can perform the

role expected by the parties. That role is often described as ensuring that the appointing party’s priorities for its case are represented on and fully assessed by the tribunal.189 In addition, even within the tribunal, through practice and procedural rules, some different functions are

187  See, e.g., UNCITRAL Model Law, art. 12; Swiss Law on Private International Law, art. 180; English Arbitration Act, 1996, §24(1)(a); German ZPO, §1036(2); Belgian Judicial Code, art. 1690(1). A few sources attempt to draw distinctions, for example, by reasoning that while party-appointed arbitrators may be subject to different standards of neutrality, they must all be equally impartial and independent. Compare de Fina, ‘The Party Appointed Arbitrator in International Arbitrations—Role and Selection’, 15 Arb. Int’l 381, 386 (1999) (‘[T]‌here is some leniency in arbitrations as to the neutrality of a party-appointed arbitrator but there is no such leniency in the absolute requirement of impartiality and independence whatever the circumstances.’); with Tupman, ‘Challenge and Disqualification of Arbitrators in International Commercial Arbitration’, 38 Int’l & Comp. L.Q. 26, 49 (1989) (‘Unquestionably all members of the tribunal in international arbitration should be held to the same standard of independence, whether appointed by a party or not. The concept of a non-neutral arbitrator as it exists in some common law systems simply has no place [in international arbitration].’) 188  See paras 7.23–7.32. 189  See Andreas Lowenfeld, ‘The Party-Appointed Arbitrator in International Controversies: Some Reflections’, 30 Tex. Int’l L.J. 59, 65 (1995) (discussing how party-appointed arbitrators must carefully

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The Functional Thesis as a prescriptive tool assigned to chairpersons. For example, under some arbitral rules, chairpersons are authorized to act autonomously and unilaterally on particular issues.190 Chairpersons also, as a matter of practice, take the lead in drafting arbitral awards.191 These procedures demonstrate that the functional role of chairpersons is expected to be, and in fact functions as, a leader and tiebreaker on the tribunal. This functional role has important distinctions from the role of party-appointed arbitrators, described earlier. Given the differing roles assigned to these two categories of arbitrators, it follows that they would have somewhat different ethical obligations. Although denied at a rhetorical level, distinctions between the ethical obligations of party- 7.89 appointed arbitrators and arbitral chairpersons are implicitly acknowledged and reinforced in some ethical prescriptions that move beyond generic terms like ‘impartiality.’ For example, if the accepted, established procedural practice is for pre-appointment inverviews of partyappointed arbitrators,192 but not chairpersons, those practices necessarily require related ethical obligations and prohibitions. This intuition is confirmed in the IBA Guidelines on Conflicts, which provide: [T]‌he arbitrator [is not disqualified by, or required to disclose, the fact that he or she] has had an initial contact with the appointing party or an affiliate of the appointing party (or the respective counsels) prior to appointment, if this contact is limited to the arbitrator’s availability and qualifications to serve or to the names of possible candidates for a chairperson and did not address the merits or procedural aspects of the dispute.193

Although pre-appointment interviews are not a universal or universally accepted practice, this Guideline acknowledges that it is an existing practice. More importantly, by referencing inquiries about ‘names of possible candidates for a chairperson’, this Guideline necessarily contemplates that it applies only to party-appointed arbitrators, not to chairpersons (from whom such names could not be solicited). This differentiation exists even though General Standard 5 of the Guidelines on Conflicts states unequivocally, ‘These Guidelines apply equally to tribunal chairs, sole arbitrators and party-appointed arbitrators.’ Similarly, the International Chamber of Commerce (ICC) Rules implicitly apply different 7.90 standards of impartiality to party-appointed arbitrators and arbitral chairpersons with respect to nationality. Generally, party-appointed arbitrators can share the nationality of their appointing party, but chairpersons are generally prohibited from sharing the nationality of either party. Although contained in arbitral rules, these are in fact a means of regulating arbitrators’ impartiality.194 Under these rules, shared nationality is not considered inconsistent with party-appointed arbitrators’ duty of impartiality (and is instead considered an important procedural right for parties). Shared nationality would, however, ordinarily be considered a sign of improper partiality for an arbitral chairperson. In other words, even if party-appointed and chairperson arbitrators are often described as having the same ethical obligations, also with nationality, there are differences in their ethical obligations to facilitate their functional role. consider the representations of the appointing party and also serve as translators of the parties’ legal culture). 190 Born, International Commercial Arbitration 2043. 191 Born, International Commercial Arbitration 2042. 192 Notably, pre-appointment interviews are not expressly included in any written procedural rules. Although it is a common practice, it is also a disputed practice. Those who oppose the practice label it as unethical, making it more difficult than other areas to separate procedure from ethics. 193  See also IBA Ethics, art. 5(1); AAA/ABA Code of Ethics, Canon III(B). 194  See paras 6.60–6.72.

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Ariadne’s Thread and the Functional Thesis 7.91 What this analysis reveals is that what is often characterized as objections about the ethical con-

duct of party-appointed arbitrators as not sufficiently ‘impartial’ are really objections about their specialized differentiated role, which is determined and facilitated by procedures through which they are appointed. This conclusion, of course, begs the question of whether the role assigned to party-appointed arbitrators is normatively desirable. This question is taken up in Chapter 9. For the purposes of current analysis, the point is simply that given their existing role, and its distinctiveness from arbitral chairpersons and in relation to the parties, different ethical obligations are appropriate. ii.  The Functional Thesis and the ethics of dissenting opinons

7.92 Another issue about party-appointed arbitrators that has recently been framed as an ethical

issue is publication of dissenting opinions, particularly dissenting opinions by party-appointed arbitrators in favour of or in support of a position taken by the party who appointed the arbitrator. Historically, dissenting opinions were not often conceived of in the abstract as implicating ethical issues. A recent highly-publicized study by leading international arbitrator and scholar Albert van den Berg has attempted to reframe these issues in ethical terms.

7.93 The premise for van den Berg’s concerns about the ethics of dissenting is the finding of the

‘astonishing fact’ that nearly all dissents written by party-appointed arbitrators in the investment arbitrations he studied were written in favour of the party who appointed them.195 From this observation, van den Berg concludes that dissenting opinions by party-appointed arbitrators are ‘suspicious’ and raise questions about the ‘neutrality of the arbitrator’.196

7.94 After arguing against various utilitarian justifications for dissenting opinions, van den Berg

concludes that dissenting opinions are only appropriate in extraordinary circumstances, such as if ‘[s]‌omething went fundamentally wrong in the arbitral process’ or the ‘arbitrator has been threatened’ with physical danger.197 He argues that a dissent would not be justified even if an ‘arbitrator genuinely believes that the majority is fundamentally wrong on an issue of law or fact’.198 These prescriptions about the conditions under which dissents are ethically appropriate are extrapolated from implied assumptions about the functional role of arbitrators.

7.95 Those assumptions about the role of arbitrators appear borrowed from the functional role of civil

law judges. As discussed previously,199 in civil law systems dissenting opinions are historically disfavoured (or prohibited) because in many civil law jurisdictions judges are expected to speak in the unified voice of a judicial institution obedient to legislative commands.200 The role of the international arbitrator, however, does not contemplate a similar role based on institutional obedience.

7.96 As adjudicators, arbitrators necessarily have obligations to repect the limits of their jurisdci-

tion and preserve the integrity and legitimacy of the system in which they operate.201 In fact, arbitrators are often said to have an obligation to render an enforceable award, an obligation that might be implied from the parties’ arbitration agreement itself. Because they operate at 195  Van den Berg, ‘Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration’, in Mahnoush Arsanjani et al. (eds.), Looking to the Future: Essays on International Law in Honor of W. Michael Reisman (2010) 824. 196  Van den Berg, ‘Dissenting Opinions’ 825. 197  Van den Berg, ‘Dissenting Opinions’ 832. 198  Van den Berg, ‘Dissenting Opinions’ 831. 199  See paras 7.38–7.43. 200  Van den Berg himself makes this point, quoting French Scholar and delegate to the 1899 Hague Peace Conference Chevilier Descamps, who reasoned that dissenting opinions improperly create ‘the appearance of there being two judgments’. Van den Berg, ‘Dissenting Opinions’ 828. 201  See paras 7.29–7.30.

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Conclusion a transnational level, however, arbitrators are not selected and trained to be handmaidens of national legislatures who simply ‘pronouce’ the law. Nor is their role defined as part of a larger institutional judiciary, which is presumed to speak with unanimity. Instead, they are selected based on their personal and professional background, and appointed on an ad hoc basis. Given the outlines of this role, the general outlines of ethical obligations regarding dissenting 7.97 opinions also seem to emerge. On the one hand, arbitrators’ obligations to render enforceable awards in an efficient manner and to uphold the legitimacy of the arbitral process suggests that certain types of dissents would clearly be ethically improper. Among these would be purely self-serving dissents (intended only to aggrandize the reputation of the arbitrator or rack up additional arbitrator fees) or nihilistic dissents (intended to undermine the arbitral process, not simply express a differing view).202 On the other hand, dissenting opinions penned for other reasons, including expression of an 7.98 arbitrator’s personal judgment when it differs in important ways from the rest of the tribunal, would be consistent with the fact that arbitrators are selected by parties based on their individual personal background and judgment. In other words, van den Berg’s prescription that dissenting opinions are inappropriate except to identify criminal or other profound pathologies would seem too restrictive given arbitrators’ role. Again, as with party-appointed arbitrators’ role more generally, this sketch of ethical obliga- 7.99 tions relating to dissenting opinions turns on assessments about how useful (or disruptive) dissenting opinions are in relation to the overarching goals of international arbitration. As with the functional role of party-appointed arbitrators, the utility of dissenting opinions is discussed in greater detail in Chapter 8.

C. Conclusion Functional roles are sensitive to evolutionary pressures because they are inherently utilitarian 7.100 and tied to the procedural rules of international arbitration, which can change dramatically from arbitration to arbitration. Ethical expectations, however, are more constant over time, even as the original role to which those obligations were tethered has slipped from its moorings. New functional roles may portend new ethical obligations, but it is not always certain that those new obligations will be readily accepted as legitimate. Because they connote larger issues of morality, ethics can be more ‘sticky’ than utilitarian functional roles. This ‘stickiness’ explains why practices regarding presentation and cross-examination of witnesses changed before related ethics expressly authorizing pre-testimonial communication. Nevertheless, understanding the link between procedure, role, and ethics can help ease the 7.101 confusion that may otherwise prevail. Although formally developed as a theory in this chapter, the underlying insights of the Functional Thesis have already been an implicit guide in international arbitration’s move toward ethical self-regulation. As surveyed in earlier chapers, several important ethical innovations were first introduced through procedural rules. Before attorney ethical obligations were articulated as such, there were procedures for disclosure and challenge.203 Before counsel ethics were formally addressed, the IBA Evidence 202  The fact that these limits may rest on arbitrators’ subjective intent may raise practical questions about how improper dissents can be identified other than on a case-by-case basis. 203  See paras 6.58–6.88.

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Ariadne’s Thread and the Functional Thesis Rules built in a rule about the ethics of pre-testimonial contact with witnesses disguised as a rule of procedure. With expert witnesses, although there has not been any formal effort yet to regulate them, the new 2010 IBA Evidence Rules attempt to distinguish the differing functional roles of tribunal-appointed and party-selected experts, and apply (with some missteps) disclosure obligations commensurate with those roles.204 7.102 One challenge in applying the Functional Thesis to ethics in international arbitration is that

procedural rules can change, often significantly, from one international arbitration to another. For arbitrators, the procedural flexibility, shifting roles, and resulting changes in ethical obligations are already contemplated in the IBA Guidelines on Conflicts. As already noted, they include exceptions if the parties have agreed to non-neutral party-appointed arbitrators. They also acknowledge that ‘in certain specific kinds of arbitration, such as maritime or commodities arbitration’ consistent with industry ‘custom and practice’ parties may ‘frequently . . . appoint the same arbitrator in different cases’.205 In keeping with these differing procedures, the IBA Guidelines acknowledge that different disclosure obligations may apply as long as all parties in the arbitration are familiar with the applicable customs and practices.

7.103 For counsel, when procedures deviate signficiantly from those provided in the IBA Evidence

Rules, in the short and medium term, the onus will be on individual arbitral tribunals to make individualized, ad hoc determinations about appropriate standards, For example, in an arbitration in which parties have decided to follow more traditional civil law style procedures, with witnesses being determined and questioned principally by an arbitrator, an ethical allowance for practice question-and-answer may be inapposite, and even general interviews may be considered an unwarranted intrusion.

7.104 In the future, the potential for significant procedural variation may mean that, instead of

a single code for international arbitration, conduct rules for counsel will need to come in the form of multiple menus that are tied to procedural options. For these reasons, arbitral institutions like the London Court of International Arbitration (LCIA), rather than a trade organization like the IBA, may be better suited to provide ethical guidance that tracks the procedural defaults most commonly used in arbitrations administered under their rules. Such an approach would be consistent with how ethics develop for other international tribunals. For example, although both international criminal tribunals with many similar procedures, the International Criminal Tribunal for the former Yugoslavia (ICTY) and the International Criminal Court have developed separate codes of ethics.206

7.105 This need for individually tailored rules presents peculiar challenges for international arbi-

tration. Even among cases managed by one arbitral institution, procedures may vary enough to alter functional roles. As noted in Chapter 6, a self-regulatory regime for counsel ethics should be primarily developed and enforced at the international level. It may be difficult, however, to induce national bar authorities to authorize the substitution of inherently ambiguous and flexible international arbitration ethics for counsel in place of fixed national ethical rules. While this challenge seems daunting, it would not necessarily be any more difficult than it was to have States cede to international arbitral processes control over such essential regulatory interests as antitrust, securities fraud, and corruption.   See paras 4.59–4.70.   IBA Guidelines on Conflicts, n. 6. 206   See paras 1.106–1.109. 204 205

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8 HERODOTIAN MYTHS AND THE IMPARTIALITY OF ARBITRATORS The ideal judge is a ‘combination of Justinian, Jesus Christ, and John Marshall’. Oliver Wendell Holmes History is a myth that men agree to believe. Napoleon Bonaparte

Most accounts of judicial and arbitrator impartiality read like Herodotian histories. 8.01 Herodotus famously wove mythological accounts of iconic heroes into his depictions of historical events.1 These mythological heroes elevated relatively mundane happenings into epic stories. They also, however, raised questions about the reliability of Herodotus’ factual assertions. In a similar vein, modern accounts of the impartiality of judges and arbitrators are often 8.02 framed in terms that are absolute, transcendent, superhuman, and even mythological. For example, Ronald Dworkin expressly embraces a heroic myth by naming his ideal judge ‘Hercules’2 and imbuing him with superhuman skill, learning, patience, and acumen. The famous US Justice Oliver Wendell Holmes, meanwhile, described the ideal judge as a ‘combination of Justinian, Jesus Christ, and John Marshall’.3 Like Herodotian myths, these legends of superhuman judges have obscured a clearer under- 8.03 standing of what judges actually do and what can reasonably be expected of them in terms of impartiality. They have also obscured a clear understanding of the impartiality obligations of arbitrators. In the absence of a clear, independent conceptualization, arbitrator impartiality obligations are simply borrowed from, or compared and contrasted with, the idealized nonhuman judge.4 Even with the development of more precise regulation, the empty rhetoric of ‘impartiality’ continues to confuse the debate.   See generally Blanche Elizabeth Vandiver, Heroes in Herodotus: The Interaction of Myth and History (1990).   Ronald Dworkin, Taking Rights Seriously (1977) 105. 3  Robert A. Ferguson, ‘Holmes and the Judicial Figure’, 55 U. Chi. L. Rev. 506, 511 (1988) (quoting Henry J. Abraham, The Judicial Process, 5th edn., (1986) 55). For those who may not know, John Marshall was the Chief Justice of the United States from 1801–1835. He is among the most famous and important US justices because his judicial opinions helped establish the basis for judicial review in US constitutional law and made the Supreme Court of the United States a co-equal branch government. 4  See, e.g., Sphere Drake Ins. Ltd v All Am. Life Ins. Co., 307 F.3d 617, 621 (7th Cir. 2002) (‘Evident partiality’ under § 10(a)(2) [of the Federal Arbitration Act] is a subset of the conditions that disqualify a federal judge under 28 USC. § 455(b).); Lozano v Maryland Casualty Co., 850 F.2d 1470, 1472 (arbitrators are not required to be impartial); Toyota of Berkeley v Auto. Salesman’s Union, 834 F.2d 751 (9th Cir. 1987) (holding 1 2

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Herodotian Myths and the Impartiality of Arbitrators 8.04 This chapter seeks to develop a more meaningful and robust concept of impartiality as

applied to international arbitrators. Section A begins by debunking the myth of absolute judicial impartiality and the related platitudes that are often used to describe arbitrators’ obligations. The larger project of the chapter is to sort through, using the Functional Thesis from Chapter 7, the pressing open issues relating to international arbitrator impartiality obligations. As will be shown, these ethical issues have arisen because of changes in arbitrators’ role in certain contexts or a more general failure to define their role more precisely. Section B takes up issue conflicts that are currently at the fore with investment arbitrators, while Section C addresses the impartiality obligations of party-appointed arbitrators and makes an affirmative case for assigning them a specialized role distinct from arbitral chairpersons. Section D prescribes market-based reforms to increase transparency and level the playing field among parties through, among other things, the creation of a new Arbitrator Intelligence project.

A.  The myth of the ‘non-humanness of judges’ 8.05 Long ago US law professor Jerome Frank sought to debunk ‘the myth of the non-human-

ness of judges’.5 Today scholars still routinely announce that judges are human, as if it were a recent genetic discovery.6 Some formalistic accounts of adjudication treat law as a ‘science’ and presume that the ‘right’ outcome in any particular case is simply a matter of proper, clinical application of law to facts. This formalistic view of law still has some purchase in certain circles, particularly in civil law systems.7 As examined in Chapter 4, however, even that arbitrators are not held to the same ‘high standards’ as judges); Morelite Constr. Corp. v New York City Dist. Council Carpenters Benefit Funds, 748 F.2d 79, 83 (2d Cir. 1984) (stating that ‘[f ]‌amiliarity with a discipline often comes at the expense of complete impartiality’); Areca, Inc. v Oppenheimer & Co., Inc., 960 F. Supp. 52, 56 (S.D.N.Y. 1997) (interpreting the Second Circuit as ‘[having] adopted less stringent standards for disqualification of arbitrators than for federal judges’); Reeves Bros. v Capital-Mercury Shirt Corp., 962 F. Supp. 408, 413 (S.D.N.Y. 1997) (‘Arbitrators are, therefore, held to a lower standard of impartiality than Article III judges.’); First Interregional Equity Corp. v Haughton, 842 F. Supp. 105, 109 (S.D.N.Y. 1994) (‘Arbitrators are . . . held to a lower standard of impartiality than Article III judges.’). 5   Jerome Frank, Courts on Trial: Myth and Reality in American Justice (1949) 147. 6  One article even uses ‘Judges as Humans’ as its super-title. See Chad M. Oldfather, ‘Judges as Humans: Interdisciplinary Research and the Problems of Institutional Design’, 36 Hofstra L. Rev. 125 (2008). Stephen M. Bainbridge, ‘Abolishing LLC Veil Piercing’, U. Ill. L. Rev. 77, 98 (2005) (‘Like all humans, judges have inherently limited memories, computational skills, and other mental tools.’); Wendy Nicole Duong, ‘Law Is Law and Art is Art and Shall the Two Ever Meet? Law and Literature: The Comparative Creative Processes’, 15 S. Cal. Interdisc. L.J. 1, 7 (2005) (‘Judges (as human beings with passion, emotions, and prejudices, living in a multi-faceted society) also read and hear other things besides legal precedents.’); Daniel A. Farber, ‘Backward-Looking Laws and Equal Protection: The Case of Black Reparations’, 74 Fordham L. Rev. 2271, 2298 (2006) (‘Judges are human beings and necessarily bring their own past experiences to bear when they consider legal issues.’); Chris Guthrie and Tracey E. George, ‘The Futility of Appeal: Disciplinary Insights into the ‘Affirmance Effect’ on the United States Courts of Appeals’, 32 Fla. St. U.L. Rev. 357, 375 (2005) (‘Judges, too, are human beings, and like other human beings, judges surely employ heuristics in their own decision-making.’); Amy Zimmerman Hodges, ‘Identifying the Linguistic Boundaries of Sex: Court Language Choice in Decisions Regarding the Availability of Sex and Procreation’, 11 Cardozo Women’s L.J. 413, 415–6 (2005) (‘Simply by being human, a judge, like any of us, uses basic knowledge of language as a necessary, often subconscious tool. in any writing.’). These references to the human side of judges, and several others, are all cited in Oldfather, n. 11. 7  Michael Waibel and Yanhui Wu, ‘Are Arbitrators Political?’ 22 (forthcoming) (working draft cited with permission); but see Mitchel de S.-O.-I’E. Lasser, ‘Judicial (Self-) Portraits: Judicial Discourse in the French Legal System’, 104 Yale L.J. 1325, 1334 (1995) (arguing that today, even in civil law systems, a static view of judicial decision-making is part of the ‘official portrait’ of the civil law judge, but understood as an oversimplification).

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The myth of the ‘non-humanness of judges’ real scientists who make actual genetic discoveries are themselves not objective in an absolute sense.8 Absolute impartiality can only be assured by non-human processes. In one colourful fic- 8.06 tional example Francois Rabelais’s Judge Bridlegoose resolved cases by casting dice in his chamber, one on behalf of each party, and deciding in favour of the party whose die had the higher number. Judge Bridlegoose was eventually prosecuted for this practice, and a real-life judge was similarly prosecuted for determining criminal sentences by flipping a coin.9 Bridlegoose’s methodology is objectionable not because it produced the wrong results. In 8.07 fact, he was ultimately absolved because all his accusers had upheld his decisions.10 The problem with dice-rolling or coin-flipping and other modes of absolutely impartial decisionmaking is that they can only be arbitrary. A process can only be absolutely impartial by limiting consideration to a range of inputs so narrow as to render outcomes arbitrary; they cannot involve complex facts or legal issues that imply a deliberative process of interpretation, assessment, and judgment that is inherently human. Adjudication by its nature requires translating competing sources of fact and legal arguments into binding conclusions.11 Like any human process, it is subject to a range of limitations and influences that affect human decision-makers. In the United States, the Legal Realist movement mainstreamed this view that judicial 8.08 decision-making necessarily involves extra-legal factors beyond legal texts, precedents, and procedures. These extra-legal factors are generally understood to include ‘ideology, judicial background, strategic reaction to other institutions, the nature of litigants, or the makeup of [tribunals]’.12 Today, a vast body of empirical and psychological research has developed regarding judges and arbitrators.13 While this insight has long been a topic of intuition and legal theory, in recent years it has become a near-obsession for various social scientists, psychologists, and other empirical researchers documenting the heuristic and cognitive biases that influence human decision-making.14   See paras 4.35–4.36.   Judith Resnik tells of a real life example, in which a judge was censured for deciding a criminal defendant’s prison term with the flip of a coin. Judith Resnik, ‘Tiers’, 57 S. Cal. L. Rev. 839, 841 (1984) (arguing that despite its efficiency and even in the absence of claims that the result was incorrect, ‘[t]‌he coin flip offended this society’s commitment to rationality’). See David A. Harris, ‘The Appearance of Justice: Court TV, Conventional Television, and Public Understanding of the Criminal Justice System’, 35 Ariz. L. Rev. 785, 793–4 (1993) (citing other unconventional but apparently objective methods which have been similarly rejected by judges). cf. LaPine Tech. Corp. v Kyocera Corp., 130 F.3d 884, 891 (9th Cir. 1997) (Kozinski, J., concurring) (commenting that ‘reading the entrails of a dead fowl’ would not be a decisional strategy that parties could contractually agree to have been employed by courts), reversed on other grounds on rehearing en banc, Kyocera Corp. v Prudential-Bache Trade Services, Inc., 341 F.3d 987 (9th Cir. 2003). 10  See Francois Rabelais (Donald M. Frame trans.), The Complete Works of Francois Rabelais (1992); Samuel Putnam (trans. and ed.), The Portable Rabelais (1974). Evidently, Judge Bridlegoose rolled dice primarily as a form of exercise, and not because of its assurance of absolute impartiality. 11  For a working definition of ‘adjudication’, see paras 7.23–7.29. 12  Gregory C. Sisk, ‘The Quantitative Moment and the Qualitative Opportunity: Legal Studies of Judicial Decision Making’, 93 Cornell L. Rev. 873, 877 (2008). 13  Tracey E. George, ‘An Empirical Study of Empirical Legal Scholarship: The Top Law Schools’, 81 Ind. L.J. 141 (2006); Theodore Eisenberg, ‘The Origins, Nature, and Promise of Empirical Legal Studies and a Response to Concerns’, 2011 U. Ill. L. Rev. 1713 (2011). 14  For works on US judges, see Chris Guthrie, Jeffrey J. Rachlinski, and Andrew J. Wistrich, ‘Inside The Judicial Mind’, 86 Cornell L. Rev. 777, 784 (2001); Gregory C. Sisk, ‘The Quantitative Moment and the Qualitative Opportunity: Legal Studies of Judicial Decision Making’, 93 Cornell L. Rev. 873, 877 (2008). For work on international arbitrators, see Michael Waibel and Yanhui Wu, ‘Are Arbitrators Political?’ (forthcoming) (working draft cited with permission); Gus Van Harten, Investment Treaty Arbitration and Public Law 8 9

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Herodotian Myths and the Impartiality of Arbitrators 8.09 Notwithstanding scholarly progress in understanding the complexities of adjudicatory decision-

making, the ethical obligations that are said to apply to adjudicators when they engage in this process are still often framed in overly simplified, often binary terms. There is the absolute moral virtue of ‘impartiality’ and its supposed opposite, the deplorable sin of ‘partiality’ or ‘bias’.15

8.10 The simplicity of rhetoric denies that the humanness of judges and arbitrators means that

they will always be subject to some form of bias. It is neither possible nor desirable to ‘strip’16 adjudicators of everything that influences or ‘biases’ their decision-making. Stripping them would necessarily remove all the qualities that make them competent and good decisionmakers.17 Ethical regulation of adjudicator impartiality, therefore, is not about prohibiting all forms of partiality or bias. It is instead about selecting what types of partiality or bias are appropriate to the particular system and devising structures and procedures that harness those biases and prevent other undesirable ones.

8.11 While many scholars have acknowledged the incoherence of treating impartiality as a static

ideal separate from the humanness of decision-makers,18 ‘[l]‌awyers and lawmakers have neither debated these problems openly nor renounced the ideal of impartiality’.19 They

(2008) 180–4; Edna Sussman, ‘Arbitrator Decision-Making: Unconscious Psychological Influences and What You can Do About Them’, 24 Am. Rev. Int’l Arb. 482 (2013); Gus Van Harten, ‘A Case for an International Investment Court’, Society of International Economic Law (SIEL) Inaugural Conference 2008 Paper (30 June 2008), or . Even if her published work to date has not focused directly on international arbitrators per se, Susan Franck has been a pioneer in empirical research assessing various issues relating to investment arbitration. See Susan D. Franck, ‘Empirically Evaluating Claims About Investment Treaty Arbitration’, 86 N.C. L. Rev. 1, 77–78 (2007). 15  As Judith Resnik has explained, the ‘buzzwords’ in discussions of judicial ethics are simplistic: ‘ “[i]‌mpartiality” is required; “bias” is forbidden’. Judith Resnik, ‘On the Bias: Feminist Reconsideration of the Aspiration for Our Judges’, 61 S. Cal. L. Rev. 1877, 1882 (1988); see Richard E. Flamm, Judicial Disqualification: Recusal and Disqualification of Judges (1996) § 1.7, 14–15 (‘[I]t is generally agreed, at least in principle, that [the parties] are entitled to nothing less than a calm and dispassionate decision-maker who operates in an atmosphere of absolute neutrality.’), quoted in Debra Lyn Bassett, ‘Judicial Disqualification in the Federal Appellate Courts’, 87 Iowa L. Rev. 1213, 1233 n. 94 (2002) (emphasis added); see also Jeffrey M. Shaman, ‘The Impartial Judge: Detachment or Passion?’ 45 DePaul L. Rev. 605, 606 (1996) (‘[W]e demand that [judges] adhere to the highest degree of impartiality that is mortally possible.’). 16  During his confirmation hearings, Clarence Thomas testified that a judge should be ‘stripped down like a runner’ and be free from ‘the baggage of ideology’. Linda Greenhouse, ‘The Thomas Hearings: In Trying to Clarify What He Is Not, Thomas Opens Question of What He Is’, N.Y. Times, 13 Sept. 1991, A19 (quoting Clarence Thomas), cited in Martha Minow, ‘Stripped Down Like a Runner or Enriched by Experience: Bias and Impartiality of Judges and Jurors’, 33 Wm. & Mary L. Rev. 1201, 1201 (1992). 17  As one scholar described in the context of judicial qualifications and bias: [E]‌very judge brings to the bench a range of professional and life experiences which will influence his judicial decision-making. A judge may be deemed ‘qualified’ to serve based on his experience as a trial lawyer, as a partner in a prestigious firm engaged in commercial law practice, as a government lawyer, or as an esteemed legal academic. These experiences, and a judge’s ‘thinking’ about law, are part of the bundle of qualifications a judge brings to the bench. Sherrilyn A. Ifill, ‘Racial Diversity on the Bench: Beyond Role Models and Public Confidence’, 57 Wash. & Lee L. Rev. 405, 460 (2000). 18  See, e.g., Jennifer Gerarda Brown, ‘Sweeping Reform from Small Rules? Anti-Bias Canons as a Substitute for Heightened Scrutiny’, 85 Minn. L. Rev. 363, 363 (2000); Donald C. Nugent, ‘Judicial Bias’, 42 Clev. St. L. Rev. 1, 23 n. 103 (1994); Jeffrey J. Rachlinski, ‘Heuristics and Biases in the Courts: Ignorance or Adaptation?’ 79 Or. L. Rev. 61, 102 (2000). Of course, not all scholars have come to appreciate this point and some continue to recite outdated clichés instead of engaging in analysis of what those standards mean. See, e.g., Alain A. Levasseur, ‘Legitimacy of Judges’, 50 Am. J. Comp. L. 43, 48–50 (2002). 19  John Leubsdorf, ‘Theories of Judging and Judge Disqualification’, 62 N.Y.U. L. Rev. 237, 238 (1987) (observing the same tendency in the context of discussions of judicial ethics).

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The new role and new ethics of investment arbitrators have neither delimited the true meaning of the term ‘impartiality’, nor wrestled with the question of what kinds of bias are acceptable in a particular system of adjudication.20 In the context of judges, procedural devices and rhetorical flourishes are often used to mask infidelity to the unachievable ideal.21 If absolute judicial impartiality is a mirage, it becomes even more distorted when super- 8.12 imposed onto the arbitrator.22 As examined in Chapter 7, the most essential guarantees of judicial impartiality, or at least the myth of impartiality, seem to be missing or openly flouted in the arbitral process.23 Chapter 7 presented the Functional Thesis as a methodology for developing ethical norms that are suited to the role assigned to arbitrators, as opposed to extrapolating those norms from judicial ethics. For arbitrators, there are three primary touchstones that determine their inter-relational role in a particular arbitral regime or context: 1) the processes by which they obtain and manage evidence and arguments about the case, 2) their decisional methodology, and 3) the process by which they are appointed. The difficulty in applying the Functional Thesis to international arbitration is that the international arbitrator is a chameleon. Parties can, through agreement, alter each of these features. When these features of arbitration shift significantly, as has occurred, for example, with the 8.13 rise of investment arbitration, arbitrators’ functional roles change, and hence their ethical obligations necessarily shift. These shifts, however, are not always immediately recognized or addressed, again for example with investment arbitrators. The next section considers the implications of the shifting role for investment arbitrators.

B.  The new role and new ethics of investment arbitrators Two of the most significant developments that precipitated shifts in the role of investment 8.14 arbitrators are the introduction of new procedures to increase transparency in investment arbitration and the rise of a system of informal precedent. These developments, and their implications for investment arbitrators’ ethics, are the topic of this Section. 20   Professor Leubsdorf artfully illustrates the ‘cloudy distinctions’ that have been drawn in the judicial context: ‘A federal judge, for instance, must withdraw for “personal bias” against a party, but not for an equally powerful bias against that party’s case or counsel. A judge may hear a case although she previously expressed strong views on its crucial legal issues, but she must withdraw if she commented on the application of uncontroversial law to the facts of that case. A judge who owns a single share of stock in a large corporation may not hear a suit for a few hundred dollars against it, but a judge may retry a suit even though her first decision was vacated for numerous errors favoring one party. A judge may construe a statute she helped write, but not instruct a jury considering a traffic accident she saw . . . There may be justifications for these distinctions, but at first thought they seem better suited to creating an appearance of scruple than to removing a rationally bounded class of undesirable judges.’ John Leubsdorf, ‘Theories of Judging and Judge Disqualification’, 62 N.Y.U.L. Rev. 237, 238–9 (1987). According to Debra Bassett, at least part of the reason for the distorted line-drawing is that ‘law tends to be highly resistant to non-objective concepts or factors, and instead seeks logic, rationality, and predictability, shunning that which is subjective or non-quantifiable’. Debra Lyn Bassett, ‘Judicial Disqualification in the Federal Courts’, 87 Iowa L. Rev. 1213, 1240 (2002). Consequently, financial interests, which can be objectively identified, are subject to clear prohibitions, whereas other types of bias that might be even more disruptive, remain mired down in confused standards and procedures. See Bassett 1241–3. 21  See Leubsdorf, ‘Theories of Judging and Judge Disqualification’ 268 (‘Judges and commentators find it all too easy to rely on procedural arguments to gloss over disqualification issues.’). 22  As Leubsdorf has put it: ‘To decide when a judge may not sit is to define what a judge is.’ Leubsdorf, ‘Theories of Judging and Judge Disqualification’ 237. 23  Instead of random assignment, parties deliberately and individually select arbitrators who are presumably predisposed toward their case. Instead of financial independence that comes with government employment and, in some systems, life tenure, arbitrators typically earn fees from individual appointments and rely on parties and co-arbitrators for future appointments.

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Herodotian Myths and the Impartiality of Arbitrators 8.15 With investment arbitrators, it is often presumed, without much analysis, that their unique

role, and hence their professional responsibilities, are determined by the subject matter of the disputes they resolve24 or the mere presence of States as parties.25 These features of investment disputes might change expectations about investment arbitrators and might constitute reasons to assign investment arbitrators a different interrelational role than commercial arbitrators. Those features, however, do very little to actually change the role of investment arbitrators in managing proceedings or making substantive decisions.26 In the absence of procedures and decisional methodologies that actually redefine their functional role, critiques that investment arbitrators fail to live up to changed expectations are somewhat misplaced. On the other hand, some changes have occurred to alter the functional role of investment arbitrators, making it necessary to reassess their ethical obligations. 1.  Transparency reforms and the precedential effect of awards

8.16 One important development that altered arbitrators’ role is adoption of procedures for

investment arbitration to ensure greater transparency. In international commercial arbitration, because arbitral proceedings are presumptively confidential under applicable rules, arbitrators are generally regarded as having an ethical duty to maintain the confidentiality of the proceedings.27 Although initially the same duty was presumed to apply in investment arbitration, more recently procedures to ensure transparency and participation of amici were introduced in investment arbitration that altered this presumption. The most important source of these reforms is the UNCITRAL Rules on Transparency in Treaty-based InvestorState Arbitration (UNCITRAL Transparency Rules), which formalized new procedures for ensuring transparency. Specifically, the UNCITRAL Transparency Rules provide that: In the presence of any conduct, measure or other action having the effect of wholly undermining the transparency objectives of these Rules, the arbitral tribunal shall ensure that those [transparency] objectives prevail.28

Although this rule does not use the language of ethics per se, as the italicized phrase indicates, its mandatory directive suggests that it is a professional ethical duty. Variance from such a professional duty would likely draw criticism that is framed as an ethical judgment. This rule in particular, and other rules that impose obligations on arbitrators to promote transparency, shifted the professional role of investment arbitrators. Their attendant ethical

24  Karl-Heinz Böckstiegel, ‘The Role of the Arbitrators in Investment Treaty Arbitration’, in Albert Jan van den Berg (ed.), International Commercial Arbitration: Important Contemporary Questions (2003) 376; Susan D. Franck, ‘Investment Law, Dispute Resolution, and the Development Promise: Back to the Future, An Empirical Analysis of Investment Treaty Awards’, 101 Am. Soc’y Int’l L. Proc. 459, 28–31 March 2007 (‘Investment treaty arbitrators make decisions of public significance. Given this role, there have been concerns about the backgrounds of these decision makers.’). 25  One experienced arbitrator observed that some arbitrators have taken on the role of ‘guardian’ of the state’s interests to ensure not only that justice is done, but also that justice appears to be done. 26  Proposals for a world investment court or creation of an investment appellate body implicitly acknowledge that most concerns about arbitrator conduct are tied to the role assigned to arbitrators, even if their express criticisms often focus overly on their failure to comply with ethical obligations that may be objectionable, but appropriate to the role they are currently assigned. Gus Van Harten, Investment Treaty Arbitration and Public Law (2008) 180–84. 27  Gary B. Born, International Commercial Arbitration (Kluwer, 2014) (citing confidentiality as an obligation of international arbitrators). 28  UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration, art. 1(6).

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The new role and new ethics of investment arbitrators duties are presumed by many to have also shifted, even if those new duties were not formally referred to or debated as ethical duties. Another important shift in the role of investment arbitrators has occurred because of changes 8.17 in the methodology of their decision-making. Today, unlike commercial arbitrators, investment arbitrators are generally acknowledged as having express law-making functions, even if the extent, nature, and desirability of that function is still hotly debated. This law-making function, in turn, is said to imply a professional obligation to follow precedent that is largely absent in international commercial arbitration.29 For example, Gabrielle Kaufmann-Kohler has argued that investment arbitrators have an 8.18 obligation to follow precedent ‘so as to foster a normative environment that is predictable’.30 Andrea Bjorklund adds that this obligation is heightened because investment arbitration as ‘a nascent legal system is struggling to develop rules’.31 In addition to an obligation to follow precedent, another commentator argues that the extended audience and purpose of investment arbitration awards creates specialized obligations for investment arbitrators in award drafting to: . . . provide reasons that will persuade future adjudicators that the decisions that were made are the right ones. Among other things, this means that tribunals should identify where they disagree with earlier tribunals, and provide reasons for siding with one camp when there is already divergence, or for deviating from lines of consistent cases.32

By suggesting that investment arbitrators are obliged to follow precedent and as a consequence that obligation ‘imposes additional explanatory burdens’ on award drafting, these commentators are identifying normative professional obligations that are implied based on investment arbitrators’ new law-making role. These ethical obligations are essential for arbitrators to fulfil that role. All these commentators are substance discussing ethical obligations, even using the term ‘ethics’. In addition to a generalized professional obligation to follow precedent, the shift in role that arises out of investment arbitrators’ decisional methodology has also introduced other obligations that are generally referred to as ‘issue conflicts’. 2.  Role switching and issue conflict As Chapter 6 demonstrated, international arbitration has provided greater clarity and guidance 8.19 on what constitutes a conflict of interest for arbitrators, and what arbitrators should disclose in the selection and appointment process.33 One area where considerable uncertainty and inconsistency still exist is with respect to the arbitrator’s relationship with the subject matter of the dispute,

29  Although the development of an informal system of precedent in international commercial arbitration was discussed earlier, such precedent is always described as persuasive, not binding in large part because of the more limited functional role of commercial arbitrators. 30  Gabrielle Kaufmann-Kohler, ‘The 2006 Freshfields Lecture—Arbitral Precedent: Dream, Necessity, or Excuse?’ 23 Arb. Int’l 357 (2007). 31  Andrea K. Bjorklund, ‘The Emerging Civilization Of Investment Arbitration’, 113 Penn St. L. Rev. 1269 (2009). 32  Irene M. Ten Cate, ‘The Costs of Consistency: Precedent in Investment Treaty Arbitration’, 51 Colum. J. Transnat’l L. 418 (2013). 33  Andrea K. Bjorklund, ‘The Emerging Civilization of Investment Arbitration’, 113 Penn St. L. Rev. 1269, 1298 (2009) (‘The increasing tendency of arbitrators to address prior decisions is having an interesting, and not yet fully developed, effect on the conflict-of-interests norms applied to international arbitrators.’).

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Herodotian Myths and the Impartiality of Arbitrators as opposed to the parties and counsel.34 Disagreement over so-called issue conflicts remains so profound that the terminology used to describe the cluster of concerns is itself muddled. 8.20 As a starting point, when the IBA Guidelines on Conflicts were drafted in 2004, these con-

cerns were not particularly pronounced. The Guidelines were written primarily with a view toward conflicts as they arise with respect to the role assigned to arbitrators in commercial arbitration, not investment arbitration.35 Moreover, the practices in investment arbitration that have given rise to concerns about issue conflict have evolved considerably since 2004 as well. Most specifically, as described earlier, a presumption that awards will be published, and a developing ethical obligation or professional norm that previous awards be deferred to (or that deviation be explained and justified), makes their law-making function more explicit. This evolution of a system of precedent and related functions has additional implications for arbitrator conflicts of interest that, to date, have not been dealt with clearly.

8.21 The Guidelines on Conflicts include on the Green List, as matters that do not need to be dis-

closed, previously expressed opinions in public sources, such as law review articles or public lectures.36 The Guidelines are notably silent, however, about so-called role-switching, except to the extent that the ‘specific issue’ advocated by an arbitrator is implicated.37

8.22 There are at least three distinct areas of concern that are collectively referred to as ‘issue con-

flicts’. First, there is an issue that is sometimes referred to as the ‘multiple hat’ or ‘hat-switching problem’, what William ‘Rusty’ Park refers to as ‘role confusion’.38 The hat-switching problem arises when an arbitrator sits in a case that may establish precedent for or otherwise affect another case in which the arbitrator acts as counsel. Second, there is the issue of arbitrators sitting in different unrelated cases that involve the same legal issue, for example, interpretation of the same or similar treaty provision. Finally, related to the second issue, there are concerns about an arbitrator serving in related cases, meaning cases that arise out of the same facts or transactions and thus involve related issues of fact and law and the same or related parties. This last issue is at least partially addressed by the IBA Guidelines on Conflicts.39 All three situations have been brought into sharp focus in investment arbitration, even if they are relevant in other forms of arbitration as well.40 34  For general commentary, see M.L. Harrison, ‘Issue Conflict in International Arbitration: Much Ado about Nothing?’ in I.A. Waird and Todd Weiler (eds.), Investment Treaty Arbitration and International Law (2009) 19–31; Judith Levine, ‘Dealing with Arbitrator “Issue Conflicts” in International Arbitration’, 61 Disp. Resol. J, Feb.–Apr. 2006 60, 65 (2006). 35  Levine, ‘Dealing with Arbitrator “Issue Conflicts”’ 65 (criticizing the guidelines as providing ‘scant guidance’). 36  Guideline 4.1.1 does not require disclosure if ‘the arbitrator has previously published a general opinion (such as in a law review article or public lecture) concerning an issue which also arises in the arbitration (but this opinion is not focused on the case that is being arbitrated)’. 37  Guideline 3.5.2 provides for disclosure if ‘the arbitrator has publicly advocated a specific position regarding the case that is being arbitrated, whether in a published paper or speech or otherwise’. It is uncertain, and perhaps even doubtful, if the reference here to ‘publicly advocated’ includes advocacy in a case since proceedings are not necessarily public in the same way as a published paper or speech. 38  William W. Park, ‘Arbitrator Integrity: The Transient and the Permanent’, 46 San Diego L. Rev. 629, 648 (2009). 39  Guideline 3.1.5 includes on the Orange List ‘the arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties’. 40  The distinction between investment arbitration and international commercial arbitration is sometimes unclear, and often less important than imagined. For example, a multi-billion dollar international commercial arbitration arising out of a concession agreement with a state arguably raises policy issues and sovereignty concerns that are at least as important as the typical investment arbitration case.

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The new role and new ethics of investment arbitrators a.  Role switching Questions about the appropriateness of hat-switching or revolving doors in investment arbi- 8.23 tration once again illustrates the impulse toward self-regulation in international arbitration, as examined in Chapter 6.41 In investment and commercial arbitration, it remains commonplace for lawyers to take on both types of work contemporaneously. As one author notes, ‘the ICSID docket is replete with arbitrators who also represent clients in other BIT cases’.42 The increase in challenges based on such role-switching is on the rise. Perhaps not surprisingly, questions about hat-switching in investment arbitration have been raised by both critics43 and leading arbitration specialists.44 As Rusty Park explains: The arbitrator might be tempted, even subconsciously, to add a sentence to an award that could later be cited in another case. Such an arrière pensée might lead to disparaging or approving some legal authority or argument regularly presented in similar disputes, and thus intended to persuade in a different matter where the arbitrator’s firm acts as counsel. The flip side of the coin might also present itself, with an arbitrator influenced by his or her position while acting as counsel in another case.45

In practice, advocates necessarily cite relevant awards authored by a tribunal on which the advocate previously served as an arbitrator because, as explained earlier, previous awards on point are treated as guiding precedent.46 This role-switching problem has been a particular focus for investment arbitration,47 where cases often involve similar legal issues, implicate important State interests and policies, and occur in a highly politicized environment in which arbitrators are accused already of being in one camp or another. Despite recent concerns, many decisions by arbitral tribunals and arbitral institutions 8.24 seemed to give a nod of approval, or at least tolerance, to the prevalence of existing practices. For example, in a ruling on a challenge to an arbitrator in a North American Free Trade Agreement (NAFTA) case regarding a different type of conflict, the International Centre for Settlement of Investment Disputes (ICSID) secretariat made a general observation about hat-switching, that: ‘[a]‌s things stand today, and irrespective of the advisability of such a situation, one may, as a general matter, be simultaneously an arbitrator in one case and a counsel in another. There is no need to disavow the possibility of assuming either role’.48   See paras 6.58–6.107.   Luke Eric Peterson, ‘Arbitrator decries “revolving door” roles of lawyers in investment treaty arbitration’, (2010). 43  See, for example: Nathalie Bernasconi-Osterwalder et al Arbitrator Independence and Impartiality: Examining the Dual Role of Arbitrator and Counsel (IISD, 2011), ; Michael Goldhaber, ‘Are two hats too many?’ Transnational Dispute Management (TDM) 3, no. 2 (2006), ; or ‘Special Issue on Arbitrator Bias’, Transnational Dispute Management (TDM) 4 (2008), . 44  Alison Ross, ‘CAS puts a stop to role-switching’, Global Arbitration Review, 14 October 2009, (quoting Professor William Park as saying, ‘Lawyers cannot always move comfortably between arguing a point of legal interpretation and sitting on a tribunal deciding the issue.’). 45  Park, ‘Arbitrator Integrity’ 648. 46  See paras 8.16–8.18. 47 . 48  Vito G. Gallo v Government of Canada, Decision on the Challenge to Mr J. Christopher Thomas QC of 14 October 2009 of the Secretary-General of ICSID, para. 29. 41 42

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Herodotian Myths and the Impartiality of Arbitrators 8.25 Similarly, in perhaps one of the most high-profile cases to address this issue, the Republic

of Ghana challenged the arbitrator nominated by the investor-claimant, Telekom Malaysia Berhad in an ad hoc investment arbitration case under the United Nations Commission on International Trade Law (UNCITRAL) Rules. The challenge was based on the arbitrator’s ongoing representation as counsel of a consortium of Italian investors in another case that involved interpretation of an expropriation provision that was similar to a provision at issue in the new arbitration over which the arbitrator was being asked to preside. Notably, the appointing authority followed existing practice in international arbitration, rejected the challenge, and found that there was no issue of partiality.

8.26 Subsequently, the District Court of The Hague, Netherlands saw things differently.49 It found

that ‘there will be justified doubts about [impartiality], if [the arbitrator] does not resign as attorney in the [other] case’ in which he was acting as counsel.50 The District Court reasoned that in his role as attorney, the arbitrator had a ‘duty [in the other case] to put forward all possibly conceivable objections against the [ICSID] award’ and that ‘[t]‌his attitude is incompatible with the attitude [the attorney] has to adopt as an arbitrator in the present case, for example, to be unbiased and open to all the merits of the RFCC/Moroccan award and to be unbiased when examining these in the present case’.51 Notably, the court rejected the notion that the roleswitching issue was covered under the IBA Guidelines’ treatment of a ‘general opinion . . . concerning an issue which also arises in the arbitration’ as not subject to disclosure or challenge.

8.27 International arbitration’s response to concerns about so-called hat-switching demonstrate it

functioning as a self-regulating regime. When the IBA Guidelines on Conflicts were drafted in 2004, they did not address role-switching. Years later, the number of challenges in investment arbitration (by both investors and States) has increased, and a ‘heated’ debate has emerged about whether it was essential for a formal separation of functions of counsel and arbitrators in investment arbitration. While chronologically the Hague District Court decision was not a tipping point, it did function as a strong signal that if primary regulation within international arbitration did not resolve the issue, national courts might.

8.28 Today, many lawyers continue to oppose prohibitions against individuals serving as both

counsel and arbitrators in investment arbitration.52 Several prominent arbitrators, however, have independently taken the position that, because they sit as arbitrators in investment cases, they will no longer serve as counsel in investment arbitrations.53 This decision for unilateral withdrawal from the market as counsel carries with it significant financial consequences since earnings are much higher as counsel than as arbitrator.54

49  The Republic of Ghana/Telekom Malaysia Berhad, Arrondissementsrechtbank [Rb.], District Court, The Hague, Challenge No. 13/2004, Petition No. HA/RK 2004.667 (Neth.) ¶ 1 (18 Oct. 2004) [hereinafter Ghana/TMB 1], available in English in 20 Mealey’s Int’l Arb. Rep. No. 1, 7; Document No. #05-050128-010Z. 50  See Ghana/TMB 1, ¶ 4. 51  See Ghana/TMB 1, ¶ 4. 52  Luke Peterson, ‘Arbitrator decries “revolving door” roles of lawyers in investment treaty arbitration’, (citing Philip Sands as saying that ‘he ceased taking on new investment treaty cases as counsel in mid-2007 so that he could begin to accept arbitrator appointments’). 53  Peterson, ‘Arbitrator decries “revolving door” roles of lawyers’. 54  For example, well-known arbitrator Albert Jan van den Berg has a personal policy of serving only as an arbitrator in investment cases. Participating as arbitrator earns considerably less in fees than as counsel, and can also affect staffing as the best and brightest associates may see working as counsel as holding better career opportunities than working for an arbitrator, no matter how well-regarded.

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The new role and new ethics of investment arbitrators Adding momentum to calls to prohibit hat-switching in investment arbitration, the issue 8.29 is no longer subject to debate or personal choice in sports arbitration. The Lausanne-based Court of Arbitration for Sport (CAS) has adopted a formal rule preventing the same individual from acting as counsel and arbitrator in CAS proceedings.55 The CAS explained that the International Council of Arbitration for Sport (ICAS) supplemented these provisions with the role-switching prohibition ‘to limit the risk of conflicts of interest and to reduce the number of petitions for challenge [to arbitrators] during arbitrations’. b.  Issue conflict More difficult than questions relating to hat-switching are questions relating to when an 8.30 arbitrator’s impartiality may rightly be challenged based on a previously asserted position or rendered a decision in another arbitration on the same or similar issue, or presided in a case in which a similar issue was heard.56 Judges in many systems are permitted to sit in related cases, or to preside over cases that raise the same issue. The question becomes why it would be permissible for judges, but not for arbitrators. In analysing this question, it is again helpful to revert to the Functional Thesis rather than to simply conclude that arbitrators should be subject to more or less stringent rules than judges. The key, it turns out, is that judges’ functional role exists within a decisional hierarchy that includes appellate review. In contrast to investment arbitration, a judge’s decision in the first case can be, and presum- 8.31 ably was, tested on appeal. Once its ‘correctness’ has been confirmed on appeal, the judge’s role, particularly in a system that involves a formal doctrine of stare decisis, is to ensure consistency among precedents.57 Given that function, the potential for a judge to apply in the second case the decision from the first case looks more like added competence than an inappropriate bias or a pre-judging of the issues. By contrast, after an arbitration decision in a particular case, the prevailing party presum- 8.32 ably considers the decision more or less correct, while the opposing, losing party presumably regards it as erroneous. No appellate body confirms the ‘correctness’ of the award. Reappointment of the same arbitrator in a second, related case would mean appointing someone whom one party believes reached an incorrect outcome in the first case and is likely to repeat the same error in the second case. Although a system of soft precedent has now emerged in investment arbitration,58 the important missing piece is substantive appeal. Without appeal, even a generalized obligation to follow precedent still allows a party to argue against pre-existing precedent in hopes of persuading a subsequent tribunal not to follow it. If research is correct in discovering that individuals are psychologically committed to 55  Joseph R. Brubaker and Michael W. Kulikowsky, ‘A Sporting Chance? The Court Of Arbitration for Sport Regulates Arbitrator-Counsel Role Switching’, 10 Va. Sports & Ent. L.J. 1, 3 (2010) (On 1 October 2009, the CAS announced amendments to the Code of Sports-related Arbitration with the ‘ “most significant” change’ being a new ‘prohibition of the double-hat arbitrator/counsel role’ in Article S18 of the Code, which states that ‘CAS arbitrators and mediators may not act as counsel for a party before the CAS’). 56  Ruth Mackenzie and Phillipe Sands, ‘International Courts and Tribunals and the Independence of the International Judge’, 44 Harv. Int’l L.J. 271, 280–1 (2003) (noting the impartiality problem arising out of ‘prior involvement . . . with an issue’ in international public adjudication but merely indicating that ‘[i]‌n some cases the need for recusal will be clear, but in others it will be less so’). 57  Consistency with previous decisions is valued even in systems that do not have a system of formal stare decisis. See Irene M. Ten-Cate, ‘International Arbitration and the Ends of Appellate Review’, 44 N.Y.U. J. Int’l L. & Pol. 1109 (2012) (describing the doctrine of jurisprudence constante in France and how in legal systems without binding precedent appellate review creates ‘de facto vertical precedent’). 58  See paras 8.17–8.19.

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Herodotian Myths and the Impartiality of Arbitrators conclusions they have already reached and less likely to revisit such conclusions,59 arbitrators may be less able to fully reconsider parties’ arguments.60 8.33 Another important feature of investment arbitral tribunals’ decisional methodologies is that

they decide not only legal issues, but also factual issues. Judicial fact-finding roles in national legal systems affect national rules regarding repeat cases when the new case would involve the same facts, as opposed to the same law. Personal knowledge of disputed facts in a case are grounds for disqualification in various systems.61 For example, in a Swiss case,62 a party challenged the appointment of a Justice of the Supreme Court to hear a challenge to an arbitration award because that same judge had rendered a decision relating to an interim award from the same arbitration. The court rejected the challenge, but only because it found that the earlier decision and the current case involved different factual issues. The court indicated that a problem would indeed exist if the judge had already committed himself to a view on the substantive matters in the current case.

8.34 In a similar vein, in the United States and other systems that rely on juries and specialized fact

finders in the court of first instance, a person would be excluded as a juror if that person had any prior knowledge of the parties or facts in the case.63 One of the primary reasons is that jurors are charged with making decisions based exclusively on evidence presented in the present case, and information learned in another case may not be presented in the subsequent case. Similarly, many systems preclude judges from sitting in cases in which they have already participated at another level. Thus, a judge is precluded in Japan from sitting in an appellate case if that judge had previously presided over the same case in lower court proceedings.64 The ethical rules against issue conflicts, particularly those involving similar fact-finding, are not only linked to arbitrators’ and judges’ functional role, but are also justified by the cognitive limitations that affect their decision-making.65

8.35 For these reasons, as well as related concerns about confidentiality, it is not surprising that

the IBA Guidelines on Conflicts already require disclosure and possible disqualification for arbitrators sitting in cases that are factually related.66 In most situations, issues conflicts do not present as clear or imminent a concern as hat-switching. Meanwhile, investment arbitrators’ fact-finding function, combined with the absence of a corrective appellate mechanism and the precedential effect of awards, cumulatively suggest that issue conflicts present special

59  For a description of anchoring bias, and its effect on decision-making, see Guthrie et al., ‘Inside The Judicial Mind’ 784. 60  Michael S. Pardo, ‘The Nature and Purpose of Evidence Theory,’ 66 Vand. L. Rev. 547, 610 (2013). 61  Personal knowledge of disputed facts in a case is grounds for disqualification of US federal judges under 28. USC. § 455(b)(1). 62  A v. B, Case No. 4P.242/2004 (Swiss Supreme Court (1st Civil Chamber) 2004). 63  Jeffrey Abramson, We, the Jury: The Jury System and the Ideal of Democracy (1994) 37 (tracing the history of juries from a repository of local knowledge to being charged with deciding solely on evidence presented). 64  Mark A. Levin, ‘Symposium: Successes, Failures, and Remaining Issues of the Justice System Reform in Japan: Circumstances that Would Prejudice Impartiality: The Meaning of Fairness in Japanese Jurisprudence’, 36 Hastings Int’l & Comp. L. Rev. 475, 486–7 (2013). 65  Michael J. Saks and Robert F. Kidd, ‘Human Information Processing and Adjudication: Trial by Heuristics’, 15 L. & Soc’y Rev. 123, 123–6 (1980–81) (discussing cognitive psychology and legal fact-finding); Pardo, ‘The Nature and Purpose of Evidence Theory’ 610 (‘When fact finders formulate a story of what happened, they may overvalue evidence that supports their story and undervalue or discount evidence that challenges it. If these shifts (or other types of cognitive biases) occur, then this information should inform the explanation-evaluation process, exposing situations where beliefs deviate from what is epistemically warranted.’). 66  IBA Guidelines.

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Impartiality obligations of party-appointed arbitrators problems for investment arbitration that are at least partly distinct similar issues that may affect arbitrators who sit in similar, but unrelated commercial cases. As a sign that international arbitration’s self-regulatory machine is fully revving up on this 8.36 issue, both the International Council for Commercial Arbitration (ICCA) and the IBA Task Force assigned to revising the IBA Guidelines on Conflicts are studying the issue conflicts and undertaking to provide greater guidance. It remains to be seen whether these entities might limit potential prohibitions to concurrent conflicts, like the Hague District Court in Telekom,67 or adopt a more structural rule, following the cue from leading arbitrators. Whatever the ultimate recommendations and approach, one thing seems clear—hat-switching and issue conflicts are not issues that international arbitration can refuse to self-regulate if it wants to retain control and legitimacy on these topics.

C.  Impartiality obligations of party-appointed arbitrators The ethical obligations of party-appointed arbitrators is another area where the concept of 8.37 ‘impartiality’ is poorly understood and conceptual muddiness about their role has led to (sometimes) unwarranted accusations of ethical misconduct. Party-appointed arbitrators have been a staple of the international arbitration process for centuries. As described in Chaper 2, with tripartite tribunals that dominate large commercial cases and investment arbitration, the conventional practice is that each party selects a party-appointed arbitrator and the two together then select the chairperson.68 The ability of parties to select arbitrators is often identified as one of international arbitration’s greatest strengths. The popularity of party-appointed arbitrators is consistently reaffirmed in practice and empirical studies regarding party preferences.69 It is also confirmed by party rejection of proposed alternatives, for example, for ‘screened’ appointment procedures or institutional appointments.70 Despite their popularity, there is a recurring sense that something might be amiss. 8.38 Summarizing reactions of various scholars, Fabien Gélinas explains, ‘[c]‌laiming that the independence of a party-appointed arbitrator can be equated to that of a domestic judge, or that of a presiding arbitrator, has been called “hypocrisy”, an “ideological façade”, a “fiction”, a “mythology”, and a “triumph of rhetoric” for the “naïve” ’.71 Several prominent historical 67  One significant challenge for a rule prohibiting concurrent role-switching is that it may not always be obvious at the commencement of a case what issues will be involved. Such a rule would also have to define what types of issues qualify since not every single issue, such as certain procedural or evidentiary issues, should be treated the same as outcome-determinative substantive issues. 68  See paras 2.24–2.48. 69  Andreas F. Lowenfeld, ‘The Party-Appointed Arbitrator in International Controversies: Some Reflections’, 30 Tex. Int’l L.J. 59, 59 (1995) (‘There is a perceived need . . . for party-appointed arbitrators in international arbitration, and the predominant practice, as reflected in the most widely used rules, is to presume, or even to require, that if three arbitrators are to be appointed, each party shall appoint or nominate one of the three.’). 70  For example, the CPR Institute for Dispute Resolution developed a relatively novel, optional ‘screened’ appointment procedure for its domestic arbitration rules, which is intended ‘to offer the benefits, while avoiding some of the drawbacks, of party-appointed arbitrators’. Robert H. Smit and Kathleen M. Scanlon, ‘How New Nonadministered Rules Improve Arbitration Processes’, 18 Alternatives to High Cost Litig. 172 (2000) (describing CPR Arbitration Rule 5.4). 71  Fabien Gélinas, ‘The Independence of International Arbitrators and Judges: Tampered With or Well Tempered?’ 24 N.Y. Int’l L. Rev. 1, 27 (2011) (quoting Pierre Bellet, ‘Des arbitres neutres et non neutres’, in Etudes De Droit International En L’honneur De Pierre Lalive (Helbing & Lichtenhahn, 1993) 339, 407; Peter F. Schlosser, ‘L’impartialité et l’indépendance en droit allemand ’, in Jacques Van Compernolle and Giuseppe Tarzia

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Herodotian Myths and the Impartiality of Arbitrators anecdotes of ‘particularly unattractive’ conduct by party-appointed arbitrators seem to justify these critiques.72 Even beyond these more outlandish examples, the status and conduct of party-appointed arbitrators is seemingly always subject to some controversy.73 As previewed in Chapter 2, when US law firms and arbitrators first arrived in international arbitrations en masse, they brought with them a unique US tradition from domestic arbitration of highlypartisan, party-appointed arbitrators.74 In US domestic arbitration, parties and their counsel often picked over partisans as party-appointed arbitrators and were allowed to communicate throughout arbitral proceedings with their party-appointed arbitrators, even about crucial issues involving strategy.75 Such conduct was not only condoned by courts, but affirmatively ratified, as exemplified by the comments of one court that ‘[a]n arbitrator appointed by a party is a partisan only one step removed from the controversy and need not be impartial’.76 8.39 Such partisanship, and particularly ex parte communication, is unacceptable in most other

systems, and has long been considered unacceptable in international arbitration.77 This fundamental clash over the role of party-appointed arbitrators became a pet topic, if not a litmus test, for international arbitration commentators.78

8.40 The rise of international investment arbitration has shone a new spotlight on party-appointed

arbitrators. Unlike international commercial arbitration, investment arbitration is often viewed as pitting investor interests against defenders of State policy interests. The visibility

(eds.), L’impartialité du Juge et de L’arbitre (Bruylant, 2006) 299, 305; Robert Coulson, ‘An American Critique of the IBA's Ethics for International Arbitrators’, 4 J. Int’l Arb. 103, 107 (1984); Alan Scott Rau, ‘Integrity in Private Judging’, 38 S. Tex. L. Rev. 485, 508 (1997); Christopher M. Fairman, ‘Ethics and Collaborative Lawyering: Why Put Old Hats on New Heads?’ 18 Ohio St. J. Disp. Resol. 505, 515 (2003). 72  Born, International Commercial Arbitration 1796 n. 871 (referring to ‘particularly unattractive’ example of ex parte communications between co-arbitrators and their nominating parties in a state-to-state). 73   As Alan Scott Rau explains: ‘Nowhere perhaps is the tension between traditional ideals of adjudicatory justice and the contractual nature of arbitration felt more keenly than in the case of the so-called “tripartite” panel, where each disputant is permitted to select “his” arbitrator and the two arbitrators named in this way are then to name the chairman of the panel. Party-appointed arbitrators on “tripartite” panels occupy an uncomfortable and ambiguous position—not quite “advocates”, perhaps, but not exactly “judges” either.’ Rau, ‘Integrity in Private Judging’ 497–98; see also Lowenfeld, ‘The Party-Appointed Arbitrator in International Controversies’ 65 (‘There is a perceived need . . . for party-appointed arbitrators in international arbitration, and the predominant practice, as reflected in the most widely used rules, is to presume, or even to require, that if three arbitrators are to be appointed, each party shall appoint or nominate one of the three.’). 74  See paras 1.31–1.32. 75  See, e.g., Sunkist Soft Drinks, Inc. v Sunkist Growers, Inc., 10 F.3d 753, 759 (11th Cir. 1993) (finding no prejudicial misconduct despite finding that party-arbitrator met with representatives and witnesses of the appointing party before arbitration to plan strategy). 76  See Lorzano v Maryland Casualty Co., 850 F.2d 1470 (11th Cir. 1988). 77  Detlev Vagts, ‘International Legal Ethics and Professional Responsibility’, 92 Am. Soc’y Int’l L. Proc. 378, 379 (1998) (discussing a hypothetical case involving contrasting approaches to ex parte communication with arbitrators as basis for panel discussion); Amb. Malcolm Wilkey, ‘The Practicalities of Cross-Cultural Arbitration’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 86 (describing differing approaches to ex parte communication as a problem in international arbitration that must be overcome); Desiree A. Kennedy, ‘Predisposed with Integrity: The Elusive Quest for Justice in Tripartite Arbitrations’, 8 Geo. J. Legal Ethics 749, 765 (1995) (arguing against the legitimacy of ex parte contact with party arbitrators). 78  See Carrie Menkel-Meadow, ‘Ethics Issues in Arbitration and Related Dispute Resolution Processes: What’s Happening and What’s Not’, 56 U. Miami L. Rev. 949, 949–51 (2002); James H. Carter, ‘Improving Life with the Party-Appointed Arbitrator: Clearer Conduct Guidelines for “Nonneutrals”’, 11 Am. Rev. Int’l Arb. 295, 298–99 (2000); see also Lowenfeld, ‘The Party-Appointed Arbitrator in International Controversies’ 65 (noting international norms that seek to neutralize perceived partisanship in the party-appointed arbitrator).

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Impartiality obligations of party-appointed arbitrators of investment arbitration cases, and the important policy interests at stake, have turned the original spotlight into a laser-like focus on investment arbitrators. The polarization of investment arbitration has led to allegations that certain arbitrators are ‘ringers’ for one side or the other, and that those who are routinely appointed by investors are biased against States, and particularly States with emerging economies. A number of high-profile challenges to investment arbitrators have added fuel to this fire.79 Based on this track record, it is perhaps not surprising that some of international arbitration’s most illustrious practitioners and its most ardent critics are united in questioning the legitimacy of party-appointed arbitrators, and even calling for their elimination.80 As examined in greater detail in Chapter 2,81 parties use the arbitrator selection process as 8.41 the ultimate form of forum shopping, even though international arbitration is most often touted as providing an inherently neutral forum. This tension is perhaps best captured in the famous account by leading arbitrator Martin Hunter, when he indicated that selecting the optimal party-nominated arbitrator means finding ‘someone with the maximum predisposition towards my client, but with the minimum appearance of bias’.82 The crucial question, for critics and defenders alike, is how does ‘maximum predisposition’ fit with arbitrator ‘impartiality’? With his characteristic willingness to shake things up, Jan Paulsson has recently answered 8.42 this question with a definitive assertion that the two concepts simply do not fit. He characterizes the practice of allowing parties to appoint arbitrators ‘unilaterally’ as ‘ill-conceived’, an ‘unprincipled tradition’, and one that creates a ‘moral hazard’.83 Another leading arbitration practitioner, Albert Jan van den Berg, has expressed a similar view.84 Adding fuel to Paulsson’s fire, van den Berg supports his view with an empirical study he conducted that reveals the ‘astonishing fact’ that nearly all dissents by party-appointed arbitrators are written in favour of the party who appointed them.85 ‘The root of the problem’ with dissenting opinions by party-appointed arbitrators, van den Berg believes, ‘is the appointment method’.86 While he may not agree with Paulsson and van den Berg on almost anything else, one of 8.43 investment arbitration’s most ardent critics, Gus Van Harten, has joined the chorus, offering

79  See, e.g., Luke Eric Peterson, ‘Dutch Court Finds Arbitrator in Conflict Due to Role of Counsel to Another Investor’, Invest-SD: Inv. L. & Pol’y Weekly News Bull., 17 Dec. 2004, . 80  In addition to Jan Paulsson, critics of investment arbitration have long been attacking the practice of party-appointed arbitrators. Howard Mann and Konrad von Moltke, ‘A Southern Agenda on International Investment?: Promoting Development with Balanced Rights and Obligations for Investors’, Host States and Home States 17 (2005), (suggesting that arbitrators in investment dispute settlement should be selected in a neutral manner and not by the parties to the dispute). 81  See paras 2.24–2.39. 82  Martin Hunter, ‘Ethics of the International Arbitrator’, 53 Arb. 219, 223 (1987). 83  Jan Paulsson, ‘Ethics, Elitism, Eligibility’, 14 J. Int’l Arb. 13, 9 (1997). 84  This position is not entirely new as it was apparently also advocated by the late Hans Smit. Robert H. Smit, ‘Thoughts on Arbitrator Selection: Why My Father Was (Usually) A Good Choice’, 23 Am. Rev. Int’l Arb. 575 (2012) (describing how Hans Smit ‘was not a fan’ of party-appointed arbitrators, how ‘in his experience [they] were often partisan in favor of the party that appointed them’ which negatively ‘infects the integrity of the arbitral process’, and how he believed that that they ‘should be abolished forthwith’). 85  Albert van den Berg, ‘Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration’, in Arsanjani et al.(eds.), Looking to the Future: Essays on International Law in Honor of W. Michael Reisman (2010) 824. 86  See van den Berg, ‘Dissenting Opinions’ 834.

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Herodotian Myths and the Impartiality of Arbitrators a similar critique. Van Harten hypothesizes that investment arbitrators are more likely to adopt certain substantive positions because of ‘apparent incentives for arbitrators to favour the class of parties (here, investors)’ who are more likely to reappoint them in the future.87 Based on these allegedly corrupting influences, Van Harten argues that ad hoc selection of decision-makers, particularly party-appointed arbitrators, makes arbitration inherently unsuitable for resolving investment disputes. 8.44 The purpose of this section is not to defend the practice of party-appointed arbitrators.

Several commentators have already done so.88 This section, instead, makes an affirmative case for the existence of party-appointed arbitrators. In other words, it argues that if we did not already have a practice of party-appointed arbitrators, we would have to invent them to ensure the proper functioning of international arbitration.

8.45 As described earlier,89 extra-legal factors in adjudicatory decision-making are inevitable and,

in many respects, a healthy by-product of human decision-making. Even if inevitable, however, tolerance for them in a fair adjudicatory process is limited, both with regard to the nature and extent of such influences. Various features in system design aim to limit the effect of these extra-legal influences, even if (and perhaps especially because) they cannot necessarily be precisely confirmed or measured.

8.46 In national legal systems, judges are most often randomly assigned cases to reduce or at

least randomize the systemic influence of extra-legal factors. In a system with random case assignment, a party may by chance benefit from or be disadvantaged by the extra-legal factors that may come into play as a result of assignment of a particular judge or judges to their case. They will not, however, be subject to the potentially compounded effect of extra-legal influences being an express and intentional consideration when the judge or a third party intentionally selects case assignments. It is the difference between a random factor or event that could happen in a fair game, and the results of a skewed game in which adverse changes are intentionally imposed.

8.47 In conceding the resistance to his proposed elimination of unilateral appointment of arbi-

trators, Paulsson speculates that the primary obstacle to weaning parties away from the practice is that confidence in ‘decent institutions’ is undermined by a ‘constant stream’

87  Gus Van Harten, ‘Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration’ (19 April 2012), Osgoode Hall Law Journal, Forthcoming; Osgoode CLPE Research Paper No. 41/2012, . Advocacy groups in the investment arbitration context have also been critical of party-appointed arbitrators. See, e.g., Corporate Europe Observatory, ‘Profiting from injustice: How law firms, arbitrators and financiers are fuelling an investment arbitration boom’, . 88  In response to these new attacks, several commentators have offered arguments in favor of partyappointed arbitrators. See, e.g., Michael E. Schneider, ‘President’s Message: Forbidding unilateral appointments of arbitrators—a case of vicarious hypochondria?’ 29(2) ASA Bull. 273, 273 (2011) (‘The basic paradigm in arbitration as we know it is for each party to appoint its arbitrator and for the two then to appoint a chairperson. The model has worked seemingly well for decades if not centuries. . .’); V.S. Mani, International Adjudication: Procedural Aspects (1980) 16–7 (describing control over the composition of the tribunal as the ‘royal road’ that has lured sovereign nations into international adjudication); Rau, ‘Integrity in Private Judging’ 506, 527 (noting the ‘widely shared conviction that the ability participate in the selection of arbitrators is critical to fairness’ and that ‘to many . . . the right to choose one member of the panel is the very “essence of arbitration” ’) quoting Sir Michael Mustill, ‘Multipartite Arbitrations: An Agenda for Law-Makers’, 7 Arb. Int’l 393, 399 (1991). 89  See paras 8.05–8.12.

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Impartiality obligations of party-appointed arbitrators of new, unreliable arbitral institutions.90 He reasons that the institutions are suspected of either poor judgment, cronyism, or corruption. It may, instead, be that parties are reluctant to trust any third party’s assessment of which extra-legal factors should be brought to bear on their case. Van Harten has expressed similar scepticism about extra-legal considerations affecting inten- 8.48 tional case assignment by appointing authorities in investment arbitration. Van Harten questions whether the International Chamber of Commerce (ICC), which is designated by some investment treaties as an appointing authority, is particularly well suited to perform that function in a neutral manner. As Van Harten notes, the ICC postures itself as ‘the world business organization’, ‘the voice of world business’, and an organization that ‘speaks for world business whenever governments make decisions that crucially affect corporate strategies and the bottom line’.91 Under Van Harten’s reasoning, the ICC will be more inclined to regard investor-friendly arbitrators as appropriate for selection, and therefore increase the likelihood that certain, in his view, undesirable extra-legal considerations would play a role in a tribunal’s decision-making.92 The larger problem, in other words, is not intentional selection by the parties, but inten- 8.49 tionality in selection generally. Because extra-legal factors necessarily affect adjudicators’ decision-making, intentional selection by any entity means pre-determining which extralegal factors are most important. Any intentionality necessarily ‘loads’ the tribunal, and every institution is subject to certain predilections or perceptions. Sometimes those predilections may align with the collective predilections of the parties, in which case, institutional appointment can function well. In most instances, however, sophisticated parties have specific preferences about which 8.50 extra-legal factors they prefer to be brought to bear in a particular case based on their own legal position and case strategy and those preferences contrast with those of the opposing party. This observation provides two reasons why party-appointed arbitrators are traditionally perceived as performing important functions. First, they ensure that those considerations the appointing party thinks are important are represented on and assessed by the tribunal.93 Second, they will ‘serve as an “interpreter” of language, of legal culture, and of law for the benefit of fellow adjudicators’.94 In this respect, arbitrator selection directly by the parties resolves the problem of intentional selection by a third party that may, intentionally or unintentionally, select arbitrators that are more advantageous to particular positions or case strategies. These explanations provide some justification for tolerating party-appointed arbitrators, but there is also an affirmative case to be made for party-appointed arbitrators. 1.  The affirmative case for party-appointed arbitrators Another, more generalized problem with arbitration tribunals is that, like any decisional 8.51 body, they are subject to certain limitations that can produce errors in decision-making.   Paulsson ‘Ethics, Elitism, Eligibility’ 13–14.   Van Harten, ‘Arbitrator Behaviour in Asymmetrical Adjudication’. 92  Van Harten, ‘Arbitrator Behaviour in Asymmetrical Adjudication’ (‘[T]‌he entity that has the ultimate power to appoint in each case, after a claim has been filed, has much greater ability to influence the adjudicative process than if it only appointed the adjudicator once and for a set term.’). 93  Febien Gélinas, ‘The Independence of International Arbitrators and Judges: Tampered With or Well Tempered’, 24 N.Y. Int’l L. Rev. 1, 26 (2011). 94  Gélinas, ‘The Independence of International Arbitrators and Judges’. 90 91

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Herodotian Myths and the Impartiality of Arbitrators As previewed at the beginning of this chapter,95 a now well-established body of research by psychologists, behavioural economists, and other experts in a range of fields demonstrates that all human beings necessarily operate in a realm of ‘bounded rationality’. Human judges and human arbitrators ‘have inherently limited memories, computational skills, and other mental tools’.96 Like other humans, they are subject to cognitive and heuristic biases that affect their decision-making.97 8.52 Some of these heuristic biases may be tied to personal backgrounds and cultural cogni-

tions of individual decision-makers.98 Other heuristics tend to occur to some degree across all decision-makers, as well as parties and their counsel. These types include, for example, anchoring,99 hindsight bias,100 and egocentric bias, framing, and representativeness heuristic.101 One specific heuristic that has particular relevance in decision-making by a board or panel of individuals, and therefore may be more acute on arbitral tribunals, is the phenomenon called ‘Groupthink’.102 a. Groupthink

8.53 Groupthink is a phenomenon developed by cognitive psychologist Irving Janis. Through

his research, Janis demonstrated that Groupthink is a ‘mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action’. Groupthink ‘occurs when the decision-making capabilities of a panel become affected by subtle peer pressure’.103

8.54 The preconditions for Groupthink seem readily observable in international arbitration. Even

as it becomes more diverse, the field of international arbitrators continues to be dominated by an elite group of insiders who are often referred to, even amongst themselves, as a ‘cartel’, a ‘fraternity’, a ‘club’,104 or a ‘mafia’.105 Collegiality, familiarity, and agreeability are important

  See paras 8.05–8.09.   Stephen M. Bainbridge, ‘Why a Board? Group Decisionmaking in Corporate Governance’, 55 Vand. L. Rev. 1, 20 (2002). 97  Guthrie, et al., ‘Inside The Judicial Mind’ 777 (reporting the results of a study that supports hypothesis that trial judges use mental shortcuts, or heuristics, to make judicial decisions). 98  Dan M. Kahan, ‘The Cognitively Illiberal State’, 60 Stan. L. Rev. 115, 137 (2007). 99 Guthrie, et al., ‘Inside The Judicial Mind’ 784. 100 Guthrie, et al., ‘Inside The Judicial Mind’ 784. 101  See also Chris Guthrie, ‘Misjudging’, 7 Nev. L.J. 420 (2007). 102  Mark Seidenfeld, ‘Cognitive Loafing, Social Conformity and Judicial Review of Agency Rulemaking’, 87 Cornell L. Rev. 486 (2002) (discussing group dynamics and its influence on the outcomes of agency decision-making). 103  Irving L. Janis, Victims of Groupthink (Houghton Mifflin, 1972) 9 (emphasis added). Several other scholars have advanced similar theories. See Cass R. Sunstein, ‘Deliberative Trouble? Why Groups Go to Extremes’, 110 Yale L.J. 71, 85–86 (2000); Stephen M. Bainbridge, ‘Why a Board? Group Decisionmaking in Corporate Governance’, 55 Vand. L. Rev. 1, 32 (2002). 104  Iran-United States, Case No. A/18, 5 Iran-US Cl. Trib. Rep. 251, 336 (1984) (describing ‘professional’ arbitrators’ as ‘forming an exclusive club in the international arena’, and are ‘automatically brought into almost any major dispute by the operation of predetermined methods’). 105 Yves Dezalay and Bryant G. Garth, Dealing in Virtue: International Commercial Arbitration and the Construction of a Trans-national Legal Order (1996) 50 (noting that the international arbitration community is ‘regularly described as a mafia’); Toby Landau, ‘Taking on the “inner mafia” ’, 7(6) Global Arbitration Review (2012), (noting the ‘degree of familiarity and contact between individual arbitrators and between arbitrators and counsel in the international field continues to grow, and continues to be reinforced 95 96

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Impartiality obligations of party-appointed arbitrators professional credentials for arbitrators,106 and important qualities for career advancement as an arbitrator.107 In his study of dissenting opinions, van den Berg identifies a strong corrollation between party-appointed arbitrators and the party in whose favour dissenting opinions are written. He also identifies, however, that party-appointed arbitrators only dissent in approximately 22% of cases, meaning that 78% of all investment arbitration cases are decided unanimously. From this statistic, it might be characterized as a group that strives for and generally achieves unanimity in decision-making.108 Paulsson himself seems to describe the existence of this precondition of Groupthink in international arbitration when he notes that leading arbitrators ‘deliberate within an intellectual zone of shared confidence’.109 Arbitrators reading the description of heuristic biases and Groupthink have an inner voice 8.55 that is probably now protesting: ‘Certainly not me!’ It is important to stress that the propensity to engage in Groupthink does not reflect on arbitrators’ intelligence, earnestness, or diligence. It is a by-product of human decision-making in group settings. It is a natural propensity of panels or groups of decision-makers whenever certain factors or preconditions are present. The behavior has been tested in numerous experimental studies110 and has been observed in various decision-making settings, including sophisticated corporate

by the modern and now widespread phenomenon of the international arbitration conference’ which occurs ‘[w]ith extraordinary frequency’). But see Paulsson, ‘Ethics, Elitism, Eligibility’ 19 (arguing against the term ‘mafia’). 106   As Dezalay and Garth have explained: ‘The principal players . . . acquire a great familiarity with each other. . . . The extraordinary flexibility of [their] rotation of roles [between counsel and arbitrator] contributes greatly to the smooth running of these mechanisms of arbitration. It promotes the reaching of acceptable awards under a regime where the players do not speak of contradictions and antagonisms that, if formulated explicitly and disclosed, would create some difficulties of legitimation.’ Dezalay and Garth, Dealing in Virtue 49. 107   Detlev Vagts and William W. Park, ‘National Legal Systems and Private Dispute Resolution’, 82 Am. J. Int’l L. 616, 623–4 (1988) (book review) (noting as an example of ‘unfortunate dimensions’ of arbitration experience that may undermine independent decision-making ‘a junior arbitrator may defer to a more senior member of the international arbitration mafia in the hope of being recommended in another case’). 108  For an extended analysis of how to evaluate the statistical significance of the 22% rate as against other rates of dissent in other contexts, see Catherine A. Rogers, ‘The Politics of Investment Arbitrators’, 24 Santa Clara Int’l L. Rev 217 (2013); see also C. Mark Baker Lucy Greenwood, ‘Dissent—But Only If You Really Feel You Must: Why Dissenting Opinions in International Commercial Arbitration Should Only Appear in Exceptional Circumstances’, 7 Disp. Resol. Int’l 31, 38–9 (2013). Although generally discouraged, dissenting opinions are not categorically or uniformly considered unacceptable. The First Interim Report of the Working Party (1 October 1986), cited in the Commission’s Final Report on Dissenting and Separate Opinions, International Court of Arbitration Bulletin (1991) Vol 2 No 1, Paragraph 2, ; Donald Donovan, cited by Manual Arroyo, op cit, Francis Patrick Donovan, ‘Dissenting Opinions’ (1996) 7 ICC International Court of Arbitration Bulletin 76. 109  Paulsson, ‘Ethics, Elitism, Eligibility’; see also Jason Webb Yackee, ‘Controlling the International Investment Law Agency’, 53 Harv. Int’l L. J. 392, 407 (2012) (the ‘small, relatively closed’ investment arbitration ‘community is more likely to be relatively ideologically cohesive and better able to coordinate its policymaking efforts’). 110  In one study of a closely related phenomenon of ‘herding’, a computer game was developed that involved a real test subject and two computer controlled subjects. After some time, the experiment excluded the live test subject, which caused ‘social pain’ measurable in activity in the same parts of the brain that react to physical pain. James Montier, Behavioural Investing: A Practitioner’s Guide To Applying Behavioural Finance (2007) 14 (describing study and using it to explain investor behavior and stock market bubbles).

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Herodotian Myths and the Impartiality of Arbitrators boards of directors, foreign policy panels, administrative agencies,111 and attorney work groups.112 8.56 Trained judges, and by extension skilled arbitrators, may be less subject to some of these heu-

ristic biases than ordinary citizens.113 Professional training and commitments to the ideal of impartiality may dampen their effect, but these psychological phenomena are not generally a matter of choice. Studies indicate that we are all, to some degree, subject to these various shortcomings and shortcuts to decision-making. In fact, even trained psychiatrists and clinical psychologists, whose job it is to make clinical, scientific assessments about patients, have been demonstrated in studies to project their own preconceptions and assumptions into diagnoses and assessments of their patients.114

b.  Party-appointed devil’s advocates 8.57 Janis not only identified the problem of Groupthink, he also prescribed a remedy. In response to a problem that is structural and integral to inter-personal group dynamics, the solution he proposes is similarly structural and integral. The most effective ways to reduce the prevalence of Groupthink, according to Janis, is to insert into a tight-knit group certain individuals whose assigned function is to challenge the consensus of that group. The function of this person is to serve as what Janis calls the ‘devil’s advocate’, meaning someone who systematically and intentionally argues for a position contrary to whatever position is being advocated or contemplated within the group. Janis proposes that this role be formally designated and that the position be ‘rotate[d]‌among group members at each meeting’.115 This is the justification, for example, for shareholder-nominated directors. Proponents of shareholder-nominated directors argue that they can break through Groupthink because they have different interests and alliances than the other corporate officers on the board.116 Similarly, on an arbitral tribunal, arbitrators who are appointed by the parties are essentially identified because of a perceived propensity to look sceptically and question decisions that may have negative consequences for the party who appointed them. 8.58 In addition to the structural idea of a devil’s advocate as a prophylactic against Groupthink,

Janis also offers what might be regarded as ‘style tips’ for how devil’s advocates should conduct themselves in order to be most effective. Janis suggests in fulfilling this ‘unambiguous assignment’, the designated devil’s advocate should ‘present arguments as cleverly and 111 Janis, Victims of Groupthink 10–3; Irving L. Janis, Groupthink: Psychological Studies of Policy Decisions and Fiascoes (Cengage Learning, 1982); Marleen A. O’Connor, ‘The Enron Board: The Perils of Groupthink’, 71 U. Cin. L. Rev. 1233, 1239 (2003). 112  Mary Twitchell, ‘The Ethical Dilemmas of Lawyers on Teams’, 72 Minn. L. Rev. 697, 753 n. 230 (1988) (describing how problems of ‘Groupthink’ can emerge within lawyer work teams and affect strategic decision-making). 113  Guthrie, ‘Misjudging’ 458 n. 216. 114  Loren J. Chapman and Jean Chapman, ‘Test results are what you think they are’, in Daniel Kahneman, Paul Slovic, and Amos Tversky,. Judgment under Uncertainty: Heuristics and Biases, pp. 238–48. 115  O’Connor, ‘The Enron Board’ 1233, n. 30. The incidence of Groupthink on corporate boards of directors has been the subject of extensive scholarly commentary. James D. Cox and Harry L. Munsinger, ‘Bias in the Boardroom: Psychological Foundations and Legal Implications of Corporate Cohesion’, 48 J.L. & Contemp. Probs. 82, 99 (1985). One particularly cynical view expressed the concern this way: ‘It’s always been interesting to me that you take these intelligent, accomplished, honorable people, and somehow you put them around a boardroom table and their IQ points drop 50 percent and their spines fly out the room.’ ‘All Things Considered’, Nell Minow Discusses How Companies Can Restore Investor Confidence (NPR radio broadcast, 2 July 2002) (cited in O’Connor, ‘The Enron Board’ 1233 n. 30). 116  Lucian Arye Bebchuk, ‘The Case for Shareholder Access to the Ballot’, 59 Bus. Law. 43, 63 (2003).

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Impartiality obligations of party-appointed arbitrators convincingly as [the person] can, like a good lawyer, challenging the testimony of those advocating the majority position’.117 The devil’s advocate, according to Janis, should ask tough questions and encourage suggestions in a low-key style, all while withholding his or her own opinion to avoid being too confrontational.118 These ‘style tips’ from Janis about how to be a good devil’s advocate are remarkably similar 8.59 to admonitions about how to be a good party-appointed arbitrator. As many commentators have observed, the party-appointed arbitrator who acts overly aggressive or too overtly partisan will end up alienating other members of the tribunal and undermining their own ability to effectively influence the tribunal’s decision-making.119 Anecdotal accounts are replete with stories of overly aggressive, overtly partisan party-appointed arbitrators being ostracized, discounted, or ignored on tribunals. In other words, referring back to Martin Hunter’s prescription at the beginning of this section, the optimal party-nominated arbitrator is ‘someone with the maximum predisposition towards my client, but with the minimum appearance of bias’.120 The ideal party-appointed arbitrator is someone who can argue forcefully to check the major- 8.60 ity’s positions that are in opposition to those of the appointing party, but in a ‘low key’ way that does not seem overtly partisan. By systematically but constructively second-guessing the majority, and expressly challenging it when appropriate, party-appointed arbitrators can improve the process, within tribunal deliberations, in the process of drafting the award and by, in some cases, actually writing a dissent. Several commentators have offered anecdotal explanations of how party-appointed arbitrators contribute to deliberative functions on the tribunal. Most such explanations, however, are often offered by way of apology for historical practices or justification for a party’s preferences.121 These accounts provide important realworld verification of the value of deliberations in which party-appointed arbitrators press against a Groupthink-gravitational pull to the path of least resistance. Under this view, party-appointed arbitrators are not a necessary evil that must be tolerated 8.61 to make parties feel comfortable or because there are no viable alternatives. They are, instead, an important structural feature of international arbitral tribunals. The threat and potential  Janis, Victims of Groupthink 267–8.  Janis, Victims of Groupthink 267–8. 119  See Laurie Craig, et al., International Chamber of Commerce Arbitration (2000) 196 (‘There is little advantage to having one guaranteed vote on a three-person tribunal.’); Lawrence W. Newman, ‘A Practical Assessment of Arbitral Dispute Resolution’, in Thomas E. Carbonneau, (ed.), Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant, rev. ed. (1998) 5–6 (arguing that a frequent, though mistaken, strategy in international arbitration is to appoint arbitrators who ‘blatantly favor one side’, which ends up polarizing the tribunal and ‘leaving the chair to decide’); Andreas Lowenfeld, ‘The Party-Appointed Arbitrator in International Controversies: Some Reflections’, 30 Tex. Int’l L.J. 59, 60 (1995) (overzealous party-appointed arbitrators lose credibility with the other members of the tribunal); Jennifer Kirby, ‘With Arbitrators, Less can be More: Why the Conventional Wisdom on the Benefits of having Three Arbitrators may be Overrated’, 26(3) J. Int’l Arb. 337, 350 (2009) (‘[A]‌party’s decision to nominate a cat’s-paw may call into question that party’s integrity and good faith in the eyes of the chairman, and lead the chairman to be more sceptical about the party itself and its case than he might otherwise have been.’). 120  Martin Hunter, ‘Ethics of the International Arbitrator’, 53 Arb. 219, 223 (1987). 121  See, e.g., Michael E. Schneider, ‘President’s Message: Forbidding unilateral appointments of arbitrators—a case of vicarious hypochondria?’ 29(2) ASA Bull. 273, 273 (2011) (‘The basic paradigm in arbitration as we know it is for each party to appoint its arbitrator and for the two then to appoint a chairperson. The model has worked seemingly well for decades if not centuries. . .’); Vagts and Park, ‘National Legal Systems and Private Dispute Resolution’ 644 (noting that party-appointed arbitrators ‘promote confidence in the international arbitral process’ and ‘party input into the selection of arbitrators has long been common practice’). 117 118

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Herodotian Myths and the Impartiality of Arbitrators reality of publishing a dissent is part of this process of challenge that promotes accountability. It can also promote party confidence in a process that lacks any form of appellate review, and is regarded as creating some potentially perverse incentives for overly eager agreement by arbitrators with co-panelists in order to secure future appointments.122 This last point brings us back to van den Berg’s study. c.  Party-appointed arbitrators and dissenting opinions 8.62 As examined in Chapter 7, Albert Jan van den Berg has conducted a study in which he concludes that nearly all publicly available dissenting opinions in investment arbitrations were issued by party-appointed arbitrators in favour of the party who appointed them.123 From this data, he concludes that ‘dissenting opinions [in investment arbitration] barely serve a legitimate purpose in a system with unilateral appointments’ and therefore suggests that investment arbitration would be ‘more credible if party-appointed arbitrators observe the principle nemine dissentiente [i.e., without dissent]’.124 He further postulates, as noted earlier, that the problem with dissenting opinions is the appointment process, specifically the practice of party-appointed arbitrators. 8.63 Van den Berg’s data does indeed seem at first blush to be a striking indictment of party-

appointed arbitrators. As analysed in Chapter 7, however, the strong correlation is neither entirely surprising, nor a clear impeachment of party-appointed arbitrators.125 It does, however, raise questions about the ethics of dissenting opinions by party-appointed arbitrators.

8.64 Consistent with facilitating the devil’s advocate function, dissenting opinions also have a

role to play in promoting party confidence in the process. Van den Berg and others reject the notion that separate opinions can enhance party confidence in the process,126 and instead

122   See Dezalay and Garth, Dealing in Virtue 49–50 (‘It’s a mafia because people appoint one another. You always appoint your friends—people you know.’); Vagts and Park, ‘National Legal Systems and Private Dispute Resolution’ 623 (noting as an ‘unfortunate dimension’ of arbitration that ‘large fees [can] exert too much influence on professional arbitrators’, causing ‘[s]‌ome arbitrators [to] be so eager for new appointments that they relax rigor and integrity’). 123   See van den Berg, ‘Dissenting Opinions’ 824–5 (reasoning that ‘[a]‌nearly 100 percent score of dissenting opinions in favor of the party that appointed the dissenting arbitrator is statistically significant’ and ‘raises concerns about neutrality’). 124  See van den Berg, ‘Dissenting Opinions’ 831, 834. It would seem that van den Berg’s observance of the principle nemine dissentiente is a minority view within the arbitration community. At a recent debate on the worth of dissenting opinions in commercial arbitration hosted by the Chartered Institute of Arbitrators between Alan Redfern and Peter Rees QC, 78% of the audience disagreed with the proposition that ‘dissenting opinions in international arbitration [are] unwelcome’. See Kyriaki Karadelis, ‘A debate on dissent’, Global Arb. Rev., 25 Nov. 2011, . 125  For an analysis of why even a strong correlation does not in itself suggest misconduct by individual partyappointed arbitrators or systemic disregard of party-appointed arbitrators’ professional obligations, including the duty of impartiality, see Rogers, ‘The Politics of Investment Arbitrators’ 235–41. If a party-appointed arbitrator was ‘now expected to dissent if the party that appointed him or her has lost the case entirely or in part’, we would expect that the rate of party-appointed arbitrators dissenting to be much higher than 22%. 126  C. Mark Baker Lucy Greenwood, ‘Dissent–But Only If You Really Feel You Must: Why Dissenting Opinions in International Commercial Arbitration Should Only Appear in Exceptional Circumstances’, 7 Disp. Resol. Int’l 31, 38–9 (2013) (‘There is some argument that the fear of a dissent being published may focus the tribunal members on the need to produce their very best work in an award; a sort of quality control, otherwise provided by an appellate court review. The counter argument is also true, namely that the ability to publish a dissenting opinion may make an arbitrator less likely to engage in constructive deliberations with the tribunal members with whom he or she disagrees.’). Van den Berg also rejects the notion that dissenting opinions can contribute to the development of law. In support of this position, he argues that ICSID dissents are not cited by subsequent tribunals, except in one ‘curious exception’. Van den Berg , ‘Dissenting Opinions’ 831. Brower and

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Impartiality obligations of party-appointed arbitrators raise concerns that dissenting opinions generally undermine the authoritativeness of an award, parties’ willingness to comply, and, in some instances, enhance losing parties’ ability to effectively challenge an award. Without diminishing concerns about potential misuse, the availability of dissent and the prac- 8.65 tice of dissenting only in part instead can promote party confidence in arbitral decisions. For example, in Wena v Egypt, the arbitrator appointed by Egypt issued a two-sentence statement that he ‘concurs in the Tribunal’s entire award’, including the award of compound interest, but was ‘not persuaded’ that ‘interest should be compounded quarterly’.127 The separate opinion on a narrow, and seemingly insignificant issue, arguably underscores the arbitrator’s substantive agreement with the rest of the tribunal on the balance of the issues.128 In the absence of the separate opinion, the appointing party would not know that the arbitrator affirmatively agreed with the tribunal’s decision, and may well assume the award was effectively a 2-1 decision with acquiescence, but not affirmative agreement, by its party-appointed arbitrator. This affirmative case for the party-appointed arbitrator would not be complete without a few 8.66 final comments. First, although party-appointed arbitrators perform a function similar to Janis’ devil’s advocate, there are important differences. The devil’s advocate is appointed to question and offer scepticism about any position being considered by the board. A party-appointed arbitrator, on the other hand, is selected only to challenge particular positions that may be contemplated by the tribunal—those positions that are harmful to the appointing party’s position. A related observation about differences between Janis’ devil’s advocate and party-appointed 8.67 arbitrators is that it is not an individual party-appointed arbitrator who acts as a devil’s advocate, but rather both party-appointed arbitrators together at different stages depending on the majority position. This observation raises important issues about equality in the appointment process. For this design feature to work similar to Janis’ devil’s advocate, it is necessary that the two party-appointed arbitrators are similarly effective in challenging a majority position. It should be ensured that the processes for selecting party-appointed arbitrators are fair and afford the parties equal opportunities to maximize their preferences. As explored in greater detail in the final section, there is reason to believe that this precondition of equal opportunity is not firmly assured under current standards and practices.129 Moreover, having party-appointed arbitrators serving as devil’s advocates puts new stress and premium on selection of the arbitral chairperson.

Rosenberg provide a compelling response, examining how dissenting opinions can and have contributed to the development of law. Charles N. Brower and Charles B. Rosenberg, The Death of the Two-Headed Nightingale: Why the Paulsson-Van Den Berg Presumption that Party-Appointed Arbitrators are Untrustworthy is Wrongheaded (Juris, 2012) 36. They also note that ICSID tribunals have cited dissenting opinions on several occasions, not only the one cited by van den Berg. Interestingly, ICSID tribunals have also on several occasions cited dissenting opinions from the International Court of Justice. Ole Kristian Fauchald, ‘The Legal Reasoning of ICSID Tribunals—An Empirical Analysis’, 19 Eur. J. Int’l L. 301, (2008). 127  See Wena Hotels Limited v Arab Republic of Egypt, ICSID Case No. ARB/98/4, Statement of Professor Don Wallace, Jr. (8 Dec. 2000). 128  Notably, because it is a relatively small sample, if this and the other cases Brower and Rosenberg argue should not be treated as dissents were subtracted from van den Berg’s sample, the overall rate of dissents was less than 20% and the percentage of dissents favoring an appointing party would be closer to 85% not 100%. This latter number still represents a strong correlation between party-appointed arbitrators and dissents favoring the appointing party. As explained below, however, this correlation may well be the result of factors other than rank partisanship. 129  See paras 8.94–8.104.

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Herodotian Myths and the Impartiality of Arbitrators 8.68 Finally, it would violate the ‘style tips’ for party-appointed arbitrators. As a practice, unilateral

appointments create the risk of hyper-partisan party-appointed arbitrators, the bogeyman that animates much of van den Berg’s and Paulsson’s analyses. Hyper-partisan arbitrators have certainly made a few appearances over the years, including in some very high-profile cases, as surveyed by Paulsson.130 They can undoubtedly be disruptive and even disturbing. This type of party-appointed arbitrator, however, is a relatively rare and self-correcting problem, both within individual cases and over time.

8.69 As parties become more sophisticated in their selection methods and more aware of the

potential hazards of an overly partisan party-appointed arbitrator, they are increasingly reluctant to appoint self-defeating hyper-partisan arbitrators. A self-correcting problem does not require radical reforms, especially at the expense of the value that party-appointed arbitrators can bring to tribunal decision-making. Increased transparency and formal feedback about arbitrators, as proposed in the final section, can help deter these practices and enable parties to avoid knowingly appointing such arbitrators.131 2.  The impartiality of party-appointed arbitrators

8.70 Making an affirmative case for party-appointed arbitrators, which redefines their functional

role, also necessitates re-examining their ethical obligations. Critiques of party-appointed arbitrators are usually framed in ethical terms, such as those used by Paulsson and van den Berg. In accordance with the Functional Thesis, developed in Chapter 7, party-appointed arbitrators have necessarily been assigned a more differentiated functional role than sole arbitrators or arbitral chairpersons. This role differentiation portends at least some differences in their ethical obligations. Despite the need for differentiation, the same terminology (‘impartiality’ or ‘independent’) is consistently applied to both categories of arbitrators.132

8.71 Most national arbitration laws and arbitral rules ostensibly impose on all members of arbitral

tribunals identical obligations of impartiality, independence, or neutrality.133 Some commentators attempt to make hair-splitting linguistic distinctions, which tend not to be particularly persuasive. For example, some sources indicate that while all arbitrators must be ‘neutral’, they may have different levels of ‘impartiality’ or ‘predisposition’. Others suggest that while party-appointed arbitrators may be subject to different standards of neutrality, they must all be equally impartial and independent.134

  Paulsson, ‘Ethics, Elitism, Eligibility’ 347–8.   See paras 8.94–8.104. 132  The rhetorical alignment of impartiality standards appears to have been originally an effort to explicitly reject an earlier (and now nearly extinct) form of intentionally highly-partisan party-appointed arbitrator that was prevalent in US domestic arbitration practice. Despite this valid objective, the effort has caused considerable conceptual confusion. 133  See, e.g., UNCITRAL Model Law, art. 12; Swiss Law on Private International Law, art. 180; English Arbitration Act, 1996, §24(1)(a); German ZPO, §1036(2); Belgian Judicial Code, art. 1690(1); Indian Arbitration and Conciliation Act, art. 12(3); Netherlands Code of Civil Procedure, art. 1033(1); Tunisian Arbitration Code, art. 57(2). 134  Compare de Fina, ‘The Party Appointed Arbitrator in International Arbitrations—Role and Selection’, 15 Arb. Int’l 381, 386 (1999) (‘[T]‌here is some leniency in arbitrations as to the neutrality of a party appointed arbitrator but there is no such leniency in the absolute requirement of impartiality and independence whatever the circumstances.’); with Tupman, ‘Challenge and Disqualification of Arbitrators in International Commercial Arbitration’, 38 Int’l & Comp. L.Q. 26, 49 (1989) (‘Unquestionably all members of the tribunal in international arbitration should be held to the same standard of independence, whether appointed by a party or not. The concept of a nonneutral arbitrator as it exists in some common law systems simply has no place [in international arbitration].’) 130 131

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Impartiality obligations of party-appointed arbitrators Language about the identity of ethical obligations of all arbitrators on a tribunal may well 8.72 have developed as an effort to vanquish rhetorically the highly-partisan version of partyappointed arbitrators in the historical examples and US domestic practices outlined earlier. Verbal redefinition is supported by the ‘Note on Neutrality’ in the 2004 American Arbitration Association/American Bar Association (AAA/ABA) Code of Ethics for Arbitrators in Commercial Disputes, which sought to shift away from historic domestic US practices and adapt to international practices. The ‘Note’ provides: [I]‌t is preferable for all arbitrators including any party-appointed arbitrators to be neutral, that is independent and impartial, and to comply with the same ethical standards. . . . This Code establishes a presumption of neutrality for all arbitrators, including party-appointed arbitrators, which applies unless the parties’ agreement, the arbitration rules agreed to by the parties or applicable laws provide otherwise.135

Effective ethical obligations of party-appointed arbitrators cannot be formulated simply by playing games with words like ‘neutrality’ or ‘impartiality’. Such abstract, value-laden terms do not provide meaningful guidance.136 Their meaning only gains real content by analysing them in context and in light of the specific roles assigned to actors to whom those obligations are applied.137 Chapter 7 established that, even if denied rhetorically, party-appointed arbitrators neces- 8.73 sarily have differentiated ethical obligations as a consequence of the differentiated interrelational roles they are assigned. These differentiated roles are established through the different procedures for designated party-appointed arbitrators (most notably the possibility of interviews for party-appointed arbitrators but not for arbitral chairpersons).138 Van den Berg concedes that differences exist, but characterizes them as a ‘few exceptions’ to party- 8.74 appointed arbitrators’ obligations of impartiality.139 This language may be inescapable given the binary terms that are usually invoked to explain impartiality obligations.140 Characterizing conduct as an ‘exception’ to impartiality obligations, however, makes it sounds like party-appointed arbitrators have a ‘free pass’ to occasionally be naughty. Instead, properly understood, these are not ‘exceptions’ to impartiality obligations, but distinctions in the nature of impartiality obligations that are appropriate given the differentiated role assigned to party-appointed arbitrators.141

135  AAA/ABA Code of Ethics, Note on Neutrality (emphasis added). See also Byrne, ‘A New Code of Ethics for Commercial Arbitrators: The Neutrality of Party-Appointed Arbitrators on a Tripartite Panel’, 30 Ford. Urb. L.J. 1815 (2003); Paul Friedland and John Townsend, ‘Commentary on Changes to the Commercial Arbitration Rules of the American Arbitration Association’, 58 Disp. Res. J. 8 (2004); Meyerson and Townsend, ‘Revised Code of Ethics for Commercial Arbitrators Explained’, 59 Disp. Res. J. 10 (2004); Sheppard, ‘A New Era of Arbitrator Ethics for the United States: The 2004 Revision to the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes’, 21 Arb. Int’l 91 (2005). 136  See paras 8.01–8.22. 137  This is the essential lesson of Jonathan Swift’s ‘Digression on Madness’, where he effectively illustrates how ethical judgment lies not in simply choosing between contrasting values, but in conceptualizing the nature of the contrast and the inter-relationships that exist between the seemingly opposite values. This and other provocative and enlightened insights about A Tale of a Tub can be found in James Boyd White, When Words Lose Their Meaning: Constitutions and Reconstitutions of Language, Character and Community (1984) 114–117. 138 Born, International Commercial Arbitration 1719 (‘It is common and ordinarily unobjectionable practice for parties, or their counsel, to contact potential choices for a co-arbitrator, to ascertain their suitability, availability, and interest, and, where appropriate, to discuss the selection of a presiding arbitrator.’). 139  Van den Berg, ‘Dissenting Opinions’ 42. 140  See paras 8.09–8.10. 141  See paras 7.86–7.99.

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Herodotian Myths and the Impartiality of Arbitrators 8.75 Party-appointed arbitrators’ ethical obliations may also differ in the level of restraint that

is properly exercised in issuing dissenting opinions. To the extent that dissents may, under the right conditions, facilitate party-appointed arbitrators’ functional role, including their ability to act as a devil’s advocate, arguably they should have greater ethical latitude than chairpersons to issue dissents. Moreover, dissenting opinions that aim at providing legitmate explanations of outcomes and explaining disagreements on the tribunal to appointing parties may be seen less as a sign of bias, and more as a verification that the devil’s advocate role has been fulfilled.

8.76 Acknowledging that party-appointed arbitrators have different ethical obligations from arbi-

tral chairpersons or sole arbitrators does not mean that they do not have impartiality obligations altogether. It should, however, lead to a more realistic definition of those standards and avoid unfair criticisms of party-appointed arbitrators. Meaningfully differentiated impartiality obligations may also, as proposed in Chapter 7, suggest that party-appointed arbitrators should be subject to somewhat more flexible standards regarding disqualification than arbitral chairpersons.142 In the meantime, the specialized role assigned to party-appointed arbitrators, particularly the function as a devil’s advocate who counterbalances the opposing party’s devil’s advocate, also puts a premium on fairness in the selection process.

D.  Reforming and refining the selection process 8.77 The differentiated inter-relational role for party-appointed arbitrators developed in Chapter 7

and the affirmative case for the devil’s advocate described earlier necessarily focuses attention on the appointment process. Tribunals can only function fairly if the appointment process is fair and affords equal opportunities for parties to appoint co-arbitrators and influence the appointment of the arbitral chairperson. There are serious questions about whether those preconditions exist under current procedures and in the existing market for arbitrator services. 1.  Procedural asymmetries

8.78 Considerable disagreement still exists within the arbitration community regarding critical

features of the arbitrator selection process. According to some commentators and sources, it is impermissible or at least unseemly to engage in any pre-appointment communication with party-appointed arbitrators.143 Other sources suggest that general inquiries about an arbitrator’s availability and expertise are permissible, but not discussions about prospective chairpersons or conducting joint interviews.144 This disagreement and resulting divergent practices exist despite the fact that the AAA/ABA Code of Ethics, IBA Rules of Ethics, IBA

  See paras 7.86–7.96.   See, e.g., Ronald Bernstein et al. (eds.), Handbook of Arbitration and Dispute Resolution Practice, 4th edn. (Sweet & Maxwell, 2003) 98–99. 144  See Charles H. Resnick, ‘To Arbitrate or Not to Arbitrate’, Bus. L. Today, May/June 2002, 37, 38 (advocating interviews of arbitrator candidates, but cautioning that parties ‘should do so only jointly with opposing counsel’); Francis O. Spalding, ‘Selecting the Arbitrator: What Counsel Can Do’, in What the Business Lawyer Needs to Know About ADR, 351, 356 (stating summarily that interviews ‘can be undertaken appropriately only if done jointly by counsel for all parties’). Notably, both of these authors are arbitrators and their rather emphatic conclusions appear to be based more on opinion and experience than published rules or established practices. 142 143

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Reforming and refining the selection process Guidelines on Conflicts of Interest, and the IBA Guidelines on Party Representaiton all indicate that such communications are permissible as long as the merits of the case are not discussed.145 The Chartered Institute, meanwhile, has published stringent guidelines about how and under what conditions pre-appointment interviews are appropriate, which include requirements for note-keeping recording the interviews.146 Although a trend seems to be emerging toward permitting interviews, reports from the field 8.79 are that wide variation in practice still exists. Meanwhile, the arrival of parties that are new to international arbitration or are not represented by experienced arbitration counsel means that whatever informal consensus may exist will not necessarily be followed. These different perspectives about the process for appointing the tribunal are much more 8.80 troubling than the oft-noted cultural differences about evidentiary and procedural rules that apply during an arbitration.147 Whereas disagreements about internal procedures can be submitted to the tribunal to resolve during the normal course of an arbitration (and are therein transparent and subject to fair resolution), disagreements about the arbitrator appointment process, however, often remain masked in opaque phases that precede commencement of an arbitration and appointment of the tribunal. A party may never know whether its opposing party engaged in interviews or exchanged views with its party-appointed arbitrator about appointment of the chairperson. Although it seems like a minor point of divergence, appointment of the tribunal is one of the 8.81 most sensitive moments in the life of an arbitration case. If, as argued earlier, party-appointed arbitrators are to serve as devil’s advocates, it is essential that they be equal counterbalances to each other. This counterbalancing effect cannot be achieved if one party is carefully vetting arbitrators, while the other is assiduously avoiding any communication. In that situation, the selection process may be producing a lopsided tribunal because one side’s arbitrator is selected through a more deliberate process. Perhaps even more importantly, one particular area of concern is the extent to which disa- 8.82 greement affects communications about potential chairpersons. If only one party discusses with its party-appointed arbitrator potential chairpersons, and that party’s preferences are effectuated by the party-appointed arbitrator, what might have been an asymmetrical tribunal can become one that is truly skewed. One solution for continuing ambiguities and divergent practices is for parties to agree 8.83 expressly on the extent or limits of interviews. While this approach may seem relatively straightforward, it can be difficult to implement when an arbitrator is identified in a

145  IBA Rules of Ethics, art. 5(1); AAA/ABA Code of Ethics, Canon III(B); IBA Guidelines on Conflicts of Interest, Green List, 1(5)(1); 2013 IBA Guidelines on Party Representation, Guideline 8(a). 146  Chartered Institute of Arbitrators, Practice Guideline 16: The Interviewing of Prospective Arbitrators, art. 13(7). 147  See Serge Lazareff, ‘International Arbitration: Towards a Common Procedural Approach’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 31 (noting an increasing awareness among both arbitrators and practitioners of ‘an emerging “harmonised procedural pattern” in international arbitration’); Berthold Goldman, ‘The Application of Law; General Principles of Law—The Lex Mercatoria’ in Julian D.M. Lew (ed.), Contemporary Problems in International Arbitration (1986) 124; Christian Borris, ‘The Reconciliation of Conflicts Between Common Law and Civil Law Principles in the Arbitration Process’ in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 1, 13–14.

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Herodotian Myths and the Impartiality of Arbitrators claimant’s request for arbitration, which is filed before the respondent is necessarily aware that the dispute is heading to arbitration. At that point, a claimant may not want to show its hand or concede anything about the process leading up to its arbitrator choice. 2.  Information asymmetries 8.84 While some procedural asymmetries affect how parties select arbitrators, information asym-

metries regarding substantive issues affect who the parties select as arbitrators. For these reasons, information asymmetries are more amorphous than procedural asymmetries, but raise more serious concerns.

8.85 In selecting arbitrators, parties assess an arbitrator’s overall reputation for integrity, intel-

ligence, and acumen, as well as expertise in particular national law, subject area, or industry. As examined in Chapter 2, a party with any degree of sophistication, however, also inevitably considers a range of issues particularly important to that party’s case strategy, including whether an arbitrator’s approach to certain procedures, management skills, approach to contract or statutory interpretation, approach to arbitral jurisdiction including, more recently, willingness to consolidate cases or decide issues relating to non-signatories, and the like.148 Although an arbitrator’s capabilities in all these respects are critical, anecdotal information about an arbitrators’ decisional history and personal and professional inclinations is not generally available through public sources. Moreover, in-depth questions about such topics are also generally regarded as beyond the scope of permissible interview topics.

8.86 The primary means by which parties and counsel obtain information about prospective

arbitrators is personal enquiries and related ad hoc research. This process relies heavily on existing relationships among members of the international arbitration community. As a result, it privileges arbitration insiders and well-financed parties who can retain leading arbitration firms. It distinctly disadvantages State parties from developing countries that either do not have extensive experience with investment arbitration or that cannot afford the services of a leading law firm.149

8.87 Typically, large law firms and corporations solicit general information from colleagues who

have had recent experience with those in the pool of potential arbitrators. So-called ‘in search of ’ or ‘ISO’ emails are routine in large-firm litigation and arbitration practices. Information generated from these general enquiries is then followed up on, usually through individualized research and more personal phone calls, to colleagues in the field. Those doing the research hope the individuals they contact can provide the most accurate and specific feedback about arbitrators regarding issues that are most essential to the case at hand.

8.88 This information is supplemented by scouring academic works, judicial opinions that might

be authored by (or comment on) an arbitrator, and those rarely published arbitral awards by an arbitrator. The aim of all these efforts is to glean insights about the arbitrator’s decisional history, temperament, or intellectual orientation on particular issues. Given the stakes (and the players), it is a surprisingly low-tech process with an inherently hit-or-miss quality. It can also be quite expensive.

  See paras 2.35–2.48.   While this may seem like a helpful advantage for companies going up against less-sophisticated parties, it may not be a panacea. Procedural inequalities may affect perceptions of fairness and legitimacy of the process, and hence willingness to voluntarily comply with a final award. 148 149

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Reforming and refining the selection process The nature and accuracy of information generated by any particular enquiry can vary 8.89 depending on the identity of the person asking the question, the person responding, and the arbitral candidate. Personal opinions about arbitrators are not fail-safe. Memories can be faulty; assessments can be biased or self-interested; information can be outdated. However, arbitration insiders and large, well-funded parties are much less likely to suffer potential misdirection. There are several reasons. First, leading arbitration specialists generally have the most and best quality information 8.90 on arbitrators. As noted in Chapter 2, service as an arbitrator is an important credential for building a practice as counsel.150 One reason is that such service provides unique insights about how various arbitrators actually operate on tribunals, during deliberations, and in award drafting. The willingness to share the most sensitive information about arbitrators will inevitably 8.91 depend on how well those asked know and trust the person making the enquiry. It is only natural that sensitive and valuable information is more readily shared with friends and close colleagues. But the effect of this individualized and personalized sorting of enquiries among favoured friends and colleagues, however, is that counsel for opposing parties in the same arbitration could pose the same enquiry about the same arbitrator to the same person, but receive different responses! The study of information asymmetries in other markets rarely if ever contemplates a level of disparity that is so precise and systematic. Furthermore, some parties can also hedge against imperfect information by casting a 8.92 broader net. According to one anecdote, a leading practitioner tracked down information about a particular arbitrator by personally contacting both sets of opposing counsel for every case in which the arbitrator was determined, based on extensive research by junior colleagues, to have presided. Given that leading specialists often charge over US$1000 per hour, this type of research is a luxury that can only be afforded by wellfunded parties. Information and resource asymmetries exist in many adjudicatory contexts and professional 8.93 settings.151 As one commentator described information asymmetries in the market for professional services: The theory of information asymmetries posits that wide information disparities exist in professional services markets (which includes. . . legal services) between providers and purchasers. The theory’s premise is that professional services are highly specialized and highly skilled, and that very little specific information about the quality of professional services is available to the public.152

The market for arbitrator services, however, involves uniquely severe asymmetries that have exceptionally important consequences. These consequences relate directly to the real and perceived legitimacy of any particular arbitration, and have already demonstrated to be particularly disruptive for perceptions of legitimacy in investment arbitration.   See paras 1.40–1.41.   Marc Galanter, ‘Why the “Haves” Come Out Ahead: Speculations on the Limits of Legal Change’, 9 Law & Soc’y Rev. 95, 98 (1974). 152  Marina Lao, ‘Discrediting Accreditation?: Antitrust and Legal Education’, 79 Wash. U. L.Q. 1035, 1079 (2001). 150 151

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Herodotian Myths and the Impartiality of Arbitrators 3.  A market-based solution to a market problem 8.94 This section proposes a new Arbitrator Intelligence (AI). While a full blueprint of the project

is beyond the scope of this book, this final section provides a brief sketch of its overall objectives and structure.

8.95 The basic idea is to create an information resource about arbitrators that is equally acces-

sible, comprehensive, substantive, and reliable. Increasing access to information, including categories of information that are currently limited to arbitration insiders, the AI will aim at reducing information asymmetries, levelling the playing field among participants, and promoting greater transparency in the arbitrator selection process. The AI will also promote market-based accountability among arbitrators, and provide opportunities for new arbitrators to establish reputations and increase the likelihood of being selected.

8.96 The AI will aim at three categories of information: public, semi-public, and feedback. It

will organize basic biographic information into individualized webpages for international arbitrators based on traditional forms of publicly available information. A second category of information, which might be considered semi-public, is arbitral awards. Whenever an award is sought to be annulled or recognized or enforced, it is filed with a court. In many systems, court files, including their attachments, can be accessed and copied.

8.97 The most innovative, and delicate, aspect of the AI would be a mechanism for providing

feedback about arbitrators. The aim of this feature is to replicate that critical information that is currently gathered through ISO emails and accessible only to some parties. The aim will be to solicit and consistently obtain constructive, reliable, and useful feedback. Critics are concerned that AI may simply be a new advertising space for international arbitrators or a ‘good news only’ source.153 Others have noted concern that it might be an arbitrator-related version of Wikipedia, or the equivalent of a grocery store ‘comment box’ that acts as a receptacle for all rational and irrational gripes, or a tabloid that collects reckless and scintillating gossip. The challenge will be to provide constructive, reliable feedback.

8.98 To avoid these concerns, feedback will not be ‘open source’, such as on eBay, Amazon, or

other online vendor sites. It will instead be solicited as responses to specific questions. Those questions will aim at the types of issues parties currently seek information about through informal inquiries.

8.99 The AI undoubtedly raises a number of important practical and legal questions. Who would

provide that feedback—counsel or parties? Should feedback be collected before or after an award is rendered? Could arbitrators themselves or arbitral institutions provide feedback? What about confidentiality? How would feedback avoid distortions by disgruntled losing parties and overly buoyant prevailing parties? Would feedback be publicly attributed to the person providing it? If not, how would contributors be accountable? How would the AI obtain arbitrator-specific information since most conduct is undertaken as a member of a three-person tribunal? How would confidentiality about the parties’ dispute and arbitral proceedings be protected? Could the AI be potentially liable for defamatory or otherwise improper postings?

153  See, e.g., ; Juris Publishing, ‘Roster of International Arbitrators’, ; .

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Reforming and refining the selection process While these are difficult questions, they are not absolute impediments. Editorial policies and 8.100 procedures will be developed to answer these questions. Those policies and procedures, along with the content of the questionnaire for eliciting feedback, will be developed by an editorial board with input from an advisory board composed of various stakeholders. In addition to these practical questions, there are also a host of structural challenges to 8.101 establishing AI. Most obviously, there are collective action and free rider problems. Narrow self-interest in maximizing their own information relative to others may deter parties and counsel from willingly participating. Moreover, some may be sceptical that, as so-called ‘rational actors’, leading arbitration specialists might agree to any mechanism that would threaten their control over the market for arbitrator services. While these are serious challenges, they likewise have solutions. The AI would be a ‘regulator’ and targeted collection and dissemination of information 8.102 would be a form of ‘regulation’, as those terms are defined in Chapter 6.154 As such, just like other private regulators, the AI would have to establish its legitimacy and develop strategies for cultivating buy-in from various actors. Feedback might be coordinated with arbitral institutions, which are well-placed to administer and collect feedback questionnaires. On the other hand, as explained in Chapter 6, institutions are not necessarily able to make such information publicly available and may welcome an external resource that can act as a buffer. This opportunity may be particularly enticing to regional institutions, whose resources in this regard are more limited, but whose input and contributions will arguably fill information gaps that currently exist for major European and North American institutions. Buy-in can also be cultivated by conditioning access to information on an agreement to pro- 8.103 vide feedback in the case for which information is sought. Organizations that provide collective representation for parties, such as the Corporate Counsel International Arbitration Group, may encourage participation. While the AI will aim primarily at assisting in the selection process in individual cases, it has 8.104 the potential for more structural implications. The mere potential for feedback may be an effective deterrent for arbitrators otherwise inclined to dally at the margin of ethical conduct. Paulsson uses the term ‘moral hazard’ to describe what he believes is the presumed untrustworthiness and bad faith of party-appointed arbitrators.155 Among economists, the term has a more specific and technical meaning. Most generically, a moral hazard is a situation when an individual has a tendency or incentive to take risks because the costs that could be incurred by the risk will not be felt by the party taking the risk.156 For international arbitrators, the preconditions of moral hazard seem pretty well established. More generally, arbitral proceedings of the arbitration community are relatively closed, reducing the risk of discovery. There is an absence of any mechanisms for professional discipline, which reduces the risk of punishment. The arguably excessive caseloads and undue delays in rendering awards, discussed in Chapter 6, as presumably examples of arbitrators taking increased professional

  See paras 6.10–6.30.   Paulsson, ‘Ethics, Elitism, Eligibility’. 156  For a classic analysis and definition of ‘moral hazard’ in principal-agent relationships, see Richard J. Arnott and Joseph E. Stiglitz, ‘The Basic Analytics of Moral Hazard’, 90 Scandinavian J. Econ. 383, 384 (1988). 154 155

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Herodotian Myths and the Impartiality of Arbitrators risks knowing that consequences are attenuated, arbitral institutions have been seeking to reduce. 8.105 Arbitrators are coming under greater pressure from parties and arbitral institutions to dem-

onstrate efficiency and one bad-apple arbitrator can undermine perceptions about the performance of the entire tribunal. However, the antics of bad-apple arbitrators—such as those identified by Paulsson—are generally known to arbitration insiders, but are rarely known outside inner circles. Although highly-partisan party-appointed arbitrators is a self-correcting problem within an individual tribunal, self-correction across cases requires parties in future cases to be able to access the relevant information.

8.106 Feedback that could be made available to future users in the arbitrator selection process

would reduce this moral hazard. It may also be a remedy for the other members of a tribunal to differentiate themselves and avoid being collectively impugned. Weeding out ‘bad’ arbitrators may also increase the potential for appointments of ‘good’ arbitrators. Even talented junior arbitrators, women arbitrators, and arbitrators from outside the traditional international arbitration hubs have difficulty establishing strong reputations to increase their chances of appointment.

8.107 Effectively, the AI would reconfigure how information about arbitrators is generated, dis-

seminated, and used in arbitrator selection processes. By levelling the playing field in the arbitrator selection process, making critical information more generally accessible, and increasing arbitrator accountability, the AI can strengthen the legitimacy and functioning of the arbitrator selection process.

E. Conclusion 8.108 As described in Chapter 6, the professional conduct of international arbitrators illustrates

the potential for international arbitration to engage in effective self-regulation. Even if significant strides have been made, however, some efforts remain stalled because the topic gets mired down in rhetorical platitudes such as Herodotian-like myths about absolute impartiality.

8.109 Because arbitrators are intentionally chosen and paid on a per-case basis, arbitrator eth-

ics are instead a perfect example of how grandiloquence undermines rather than promotes confidence and clarity in professional ethics. It illustrates, in other words, a recurring theme of this book—that effective professional ethics do not dictate what should be done in a vacuum sealed off from all real-world influences and particularly from market influences. The overriding question for professional ethics norms in the twenty-first century is: What does it mean to be professionally ethical within, not apart from, an operating marketplace? It is a question that international arbitration must answer for all its participants, but it is also uniquely well-positioned to answer. Chapter 9 takes up some of the most difficult aspects of this question, namely how party autonomy fits with arbitration’s adjudicatory function, and what that relationship implies for the role of the arbitrator.

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9 DUCK-RABBITS, A PANEL OF MONKEYS, AND THE STATUS OF INTERNATIONAL ARBITRATORS Welche Thiere gleichen einander am meisten? Kaninchen und Ente. Anonymous artist* [S]‌hort of authorizing trial by battle or ordeal or, more doubtfully, by a panel of three monkeys, parties can stipulate to whatever procedures they want to govern the arbitration of their disputes. Judge Richard Posner**

In the famous duck-rabbit illusion (see Figure 9.1), observers can see either a duck or a 9.01 rabbit, but not both. At least not at the same time:

Figure 9.1  *  Translation: ‘Which animals are most like each other? Duck and Rabbit’, text surrounding earliest known depiction of the Rabbit and Duck optical illusion, which appeared in the 23 October 1892 issue of Fliegende Blätter. **  Baravati v Josephthal, Lyon & Ross, Inc., 28 F.3d 704, 709 (7th Cir. 1994).

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators Similarly, with international arbitration, observers can see either a species of contract, or a form of private adjudication, but not both. At least not at the same time. As Alan Rau describes, ‘from one perspective, [arbitration] is an exercise of private ordering’, while ‘from another angle it is an exercise in adjudication’.1 Viewing arbitration as either contract or adjudication, it turns out, affects many aspects of ethical and policy issues raised in earlier chapters, most notably conceptions of arbitrators’ role and their related ethical obligations. 9.02 This chapter examines how the duality of international arbitration affects conceptualiza-

tions about the status of international arbitrators. Debate over whether international arbitration is a creature of contract or a form of adjudication parallels a debate about whether arbitrators are ‘service providers’ whose status is determined by contract, or ‘justice providers’ whose status is more akin to judges. This chapter seeks to develop a more nuanced theory of the status of arbitrators and how it affects their relations with parties and other obligations. Section A provides an overview of the contractual and adjudicatory models of arbitration. Section B develops a model of the status of international arbitrators that comprehends both contractual and adjudicatory aspects. It offers a ‘proof ’ of the conceptual duality of their role by analysing several doctrines and applications, including contractual limitations on impartiality, arbitral immunity, and the public and club goods produced by international arbitrators.

A.  Competing models of international arbitration 9.03 This section examines the foundations of competing models of arbitration. Subsection 1

begins by explaining the adjudicatory model of arbitration, and Subsection 2 examines the contractual model. Section B builds on this background to promote a more nuanced analysis of arbitrators’ status that comprehends both the contractual and adjudicatory aspects of arbitration. 1.  The adjudicatory model of arbitration

9.04 One of the fundamental precepts underlying the adjudicatory view of arbitration is the

apparently intuitive observation that arbitrators substitute for judges and arbitration procedures substitute for litigation. This ‘judicial substitute’ line of reasoning originated in expressions of hostility toward arbitration, when courts resisted being ‘ousted’ of their jurisdiction.2

1  Alan Scott Rau, ‘The Culture of American Arbitration and the Lessons of ADR’, 40 Tex.Int’l L.J. 449, 451 (2005); see also Peter B. Rutledge, ‘Toward A Contractual Approach For Arbitral Immunity’, 39 Ga. L. Rev. 151, 160 (2004) (noting that theories of arbitration take one of two forms: the ‘regulatory model, which emphasizes that active role of the state in defining the contours and boundaries of arbitration’, and the ‘marketbased model’, which ‘rests on the basic belief that the form and structure for resolving a dispute should be left to private choice, unencumbered by a regulatory scheme’). 2  Early English precedents held arbitration clauses unenforceable in order to guard judicial jurisdiction from ouster by arbitration. See Paul D. Carrington and Paul H. Haagen, ‘Contract and Jurisdiction’, 1996 Sup. Ct. Rev. 331, 339.

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Competing models of international arbitration Hostility toward arbitration waned as support for arbitration grew, and arbitrators became increasingly regarded as legitimate substitutes for judges. For example, the original justification for allowing mandatory law claims to be submitted to arbitration was that arbitration is simply a change in venue, a substitution of arbitrators for judges.3 In more modern strains, the professional identity of judges and arbitrators has been blurred 9.05 both to aggrandize and legitimize the arbitral process. For example, in an English case, Lord Mustill reasoned that after an ‘arbitrator accepts an appointment . . . he becomes a judicial officer, with exactly equal duties towards both parties. It is unnecessary to discuss whether the relationship is contractual in nature’.4 Another related strain of the adjudicatory vision of arbitration focuses on parties’ procedural 9.06 rights. It focuses on comparisons of the protections for procedural fairness that exist in litigation as compared to arbitration. For example, the American Bar Association’s early critique of pre-dispute contractual arbitration provisions was that it required ‘a giving up [of ] rights that the American people really regard as sacred and they shouldn’t be called upon to do so’.5 Scholars committed to the adjudicatory model of arbitration also emphasize the essential procedural protections that are jeopardized in arbitration, such as (in the United States) the right to a trial by jury,6 the right to appeal the substantive decision of the trial judge,7 the procedural rights to conduct extensive discovery, to have a formal hearing or trial, and to call and cross-examine witnesses.8 3   See, e.g., Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985) (‘By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.’); Gilmer v Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991) (same). 4   Succula Ltd and Pomona Shipping Co. Ltd v Harland and Wolff Ltd, 2 Lloyd’s Rep. 381, 388 (1980). 5   Ian R. MacNeil, American Arbitration Law: Reformation, Nationalization and Internationalization (Oxford University Press, 1992) 49–54 (quoting comments by Joseph Francis O’Connell made on behalf of the arbitration committee of the US National Conference of Commissioners on Uniform State Laws). 6   Many scholars observe that in the arbitration context, the ‘jury trial waiver’ issue is rarely raised. Critics question the current law that holds that if there is assent to a written, broad arbitration clause, the right to a jury trial is waived, despite the absence of one or more factors that scholars argue would otherwise be required. See Jean R. Sternlight, ‘Rethinking the Constitutionality of The Supreme Court’s Preference for Binding Arbitration: A Fresh Assessment of Jury Trial, Separation of Powers, and Due Process Concerns’, 72 Tul. L. Rev. 1 (1997). Outside of the arbitration context and apart from this waiver exception during pretrial preparation, courts require a ‘knowing and intentional’ waiver of the right to a jury trial. Relevant factors include the clarity and prominence with which the language is expressed, the sophistication of the parties, whether they are represented by counsel, and their relative bargaining power. See Luis Acosta, Inc. v Citibank, N.A., 920 F. Supp. 15, 18 (D.P.R. 1996) (discussing authorities). Jean R. Sternlight, ‘Mandatory Binding Arbitration and the Demise of the Seventh Amendment Right to a Jury Trial’, 16 Ohio St. J. On Disp. Resol. 669 (2001) (arguing that ‘[a]‌lthough the right [to a jury trial] is waivable, such waivers must be genuine; specifically, they must be knowing, voluntary, and intelligent. Companies cannot legitimately evade this strict constitutional requirement by using arbitration clauses’). 7  See Wilko v Swan, 346 US 427 (1953). The British Queen’s Bench Commercial Court reached a similar conclusion that an arbitration agreement governed by the International Chamber of Commerce (ICC) Rules incorporated article 24 of the ICC Rules and thereby constituted a valid waiver of the right to appeal. The court reasoned that, ‘[a]‌rbitration “according” to I.C.C. rules must in my judgment mean “in conformity with” them’. Arab African Energy Corp. v Olieprodukten Nederland B. [1983] 2 QB 419. Some scholars challenge whether arbitration clauses should operate as waivers of these rights, but their concerns are focused more on the effect of such treatment on unempowered parties, such as claimants in consumer and employment actions. See, e.g., Jean R. Sternlight, ‘Rethinking the Constitutionality of the Supreme Court’s Preference for Binding Arbitration’ (raising several possible constitutional challenges to statutorily mandated arbitration, but concluding that ‘an arbitration agreement entered into knowingly by two businesses will generally raise no constitutional issues’). 8  Parties may still have an opportunity to call or cross-examine witnesses, but it can no longer be considered a right because arbitral awards are enforceable even if a party is precluded from conducting cross-examination.

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators 9.07 The adjudicatory vision of arbitration is also advanced through what might be called ‘entan-

glement’ arguments. These conclude that, even if an ostensibly private process, arbitration involves state action. Under this view, arbitration agreements are subject to certain due process limitations, but those limits derive from the entanglement of courts in enforcing private arbitration agreements and awards.9

9.08 The commonality in these efforts to compare and contrast arbitration with litigation is

that they all presume the appropriate framework for assessing arbitration is how well it substitutes for litigation. This assumption, in turn, presumes a judicial stand-in role for arbitrators, which has led to some logical shortcuts that are unhelpful. As discussed in Chapter 7, many sources rely on the impartiality standards of national court judges to define the impartiality obligations of arbitrators.10 This analogy also leads to ipso facto reasoning in place of analytic evaluation of the justifications for and arguments against arbitrator immunity.11

9.09 While staunchly defended in contexts involving consumers and other vulnerable par-

ties, by most accounts, this conventional adjudicatory vision of arbitration is on the decline, or has already fallen into demise. In its place, a contract vision of arbitration has grown up. 2.  The contract vision of arbitration

9.10 According to the contract vision of arbitration, parties enter into a private agreement for

dispute resolution services provided by a private individual according to contractually agreed to terms. The ascendance of this view in the United States is often attributed to the Supreme Court becoming ‘a born-again Willistonian believer in freedom of contract’12 and a Law and Economics movement that has seized much control of academic debate, at least in the United States.13 This approach to arbitration tends to coincide with a larger preference for deregulation.14 In arbitration, the existence of such opportunity depends on either the existence of party agreement or a discretionary decision by the arbitrator. 9   See Richard Reuben, ‘Constitutional Gravity: A Unitary Theory of Alternative Dispute Resolution and Public Civil Justice’, 47 UCLA L. Rev. 949, 1013 (2000); Jean Sternlight, ‘Rethinking the Constitutionality of the Supreme Court’s Preference for Binding’ 40–7 (implicitly endorsing the view that in the securities industry ‘the Securities and Exchange Commission is sufficiently intertwined with the private dealer associations that require arbitration to give rise to state action’). 10  See paras 7.17–7.20. 11  See para. 7.18. 12  See Paul D. Carrington and Paul H. Haagen, ‘Contract and Jurisdiction’, 1996 Sup. Ct. Rev. 331, 337; Carbonneau, The Exercise of Contract, 1190: ‘The US Supreme Court doctrine on arbitration represents the most absolute statement of the vigor of contract freedom in arbitration’ (referring to the court’s ‘simple faith in freedom of contract’). 13  Edward M. Morgan, ‘Contract Theory and the Sources of Rights: An Approach to the Arbitrability Question’, 60 S. Cal. L. Rev. 1059, 1069 (1986–87) (‘[T]‌he legitimacy of arbitral proceedings flows directly from a vision of private autonomy as the conceptual basis of contract law.’); Celeste M. Hammond, ‘The (Pre) (As)sumed ‘Consent’ of Commercial Binding Arbitration Contracts: An Empirical Study of Attitudes and Expectations of Transactional Lawyers’, 36 J. Marshall L. Rev. 589, 589 (2003) (‘American courts have emphasized the “voluntary” nature of the parties’ consent to substitute arbitration in lieu of litigation.’). 14  For an overview of the debate regarding arbitration as a form of deregulation in the United States, see, e.g., Kenneth S. Abraham and J.W. Montgomery, III, ‘The Lawlessness of Arbitration’, 9 Conn. Ins. L.J. 355, 357 (2003); Paul D. Carrington, ‘Self-Deregulation, the “National Policy” of the Supreme Court’, 3 Nev. L.J. 259 (2002); David S. Schwartz, ‘Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration’, 1997 Wis. L. Rev. 33, 62 (1997); Thomas J. Stipanowich,

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Competing models of international arbitration Under this view, any resemblance between arbitration and litigation is considered quaint, 9.11 superficial, and perhaps even just coincidental.15 The contractual view of arbitration implies that arbitrators are simply service providers and effectively agents of the parties.16 As service providers, arbitrators are obliged only to provide those services specified in the parties’ contract17 and are no different from other service providers, such as plumbers or hairdressers. Under this view, the legitimacy of their decisional outcomes is measured only by the extent to which the arbitrator satisfies the parties’ collective interests expressed in the contract and, in contrast to judges, do not serve any public function.18 Under this view, arbitration is often described as a means of ‘resolving disputes’ and distinguishable from true ‘adjudication’, which involves a public function in which judges make and enforce law.19 This contractual vision of arbitration seems, at some level, to be simply a literal description. 9.12 It is axiomatic that arbitral jurisdiction derives from the arbitration agreement. But also the larger structure of an arbitrator’s engagement involves a web of contractual relationships. Even though in the normal course arbitrators do not sign any written agreement with the parties, the prevailing view is that the arbitrator’s acceptance of the appointment gives rise to an implied, trilateral contract, in which the arbitrator becomes a party to the previously bilateral arbitration agreement between the parties.20 The fact that arbitrators are engaged through a contractual relationship leads to obvious 9.13 analogies with other types of employment and service providers. This view was adopted by the English Court of Appeal in Jivraj v Hashwani, when it concluded that an arbitrator was engaged in employment to personally provide services. The question the court considered was whether an arbitrator was engaged in ‘employment under . . . a contract personally to do any work’, thereby subjecting the relationship between the parties and arbitrator to UK employment discrimination regulations.21 If the arbitrator were in an employment relationship within the meaning of UK law, then prohibitions against discrimination on the basis ‘Punitive Damages and the Consumerization of Arbitration’, 92 Nw. U. L. Rev. 1, 8 (1997); Stephen J. Ware, ‘Default Rules from Mandatory Rules: Privatizing Law Through Arbitration’, 83 Minn. L. Rev. 703, 710–12 (1999). 15   See, e.g., Andrew Guzman, ‘Arbitrator’s Liability: Reconciling Arbitration and Mandatory Rules’, 49 Duke L.J. 1279, 1316–24 (2000) (‘Despite its superficial similarity to a court action . . . an arbitration proceeding is more properly viewed as the product of contract.’). 16  See Guzman, ‘Arbitrator’s Liability’ 1316–24. 17  Guzman’s commitment to arbitrators’ role being solely a function of contract is revealed in his proposed mechanism for ensuring application of mandatory law—implication of a mandatory contract term, which parties can sue for breach of. Guzman also relies on the existence of a contractual relationship to differentiate arbitrators from judges. 18  Joshua Karton, The Culture of International Arbitration and the Evolution of Contract Law (2013) 99.99 (‘Judges are state officials, officers of the court. . . . Their duty is to the law itself—court justice is public justice . . . Arbitrators are private individuals.’). 19  See Robert G. Bone, ‘Party Rulemaking: Making Procedural Rules Through Party Choice’, 90 Tex. L. Rev. 1329, 1386–88 (2012) (framing but going beyond dichotomy to develop a more functional comparison). 20  K/S Norjarl A/S v Hyundai Heavy Indus. Co. Ltd [1992] 1 QB 863, 885 (English Ct. App.) (‘On appointment, the arbitrator becomes a third party to that arbitration agreement, which becomes a trilateral contract.’). Judgment of 19 December 1996, Société Qualiconsult v Groupe Lincoln, 1998 Rev. Arb. 121, 124 (Paris Cour d’appel) (parties’ and arbitrators’ obligations are defined by the ‘arbitration contract’) (cited in Gary B. Born, International Commercial Arbitration (2014) 2017) (describing how other jurisdictions have adopted similar analyses, including Switzerland, Germany, Austria, and Finland). 21  Jivraj v Hashwani [2011] UKSC 40, ¶¶ 6–9, 23 (UK S.Ct.) (citing and quoting Employment Equality (Religion or Belief ) Regulations 2003 and EU Council Framework Directive 2000/78/EC of 27 November 2000).

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators of religious belief or nationality would arguably apply. The court reasoned that the function of an arbitrator ‘is no different from instructing a solicitor to deal with a particular piece of legal business . . . or consulting a doctor about a particular ailment or an accountant about a tax return’.22 9.14 A version of this view of arbitrators is also presented in a recent study by Joshua Karton.

Specifically, he states ‘[a]‌t its heart, arbitration is a service industry’.23 He explains that arbitrators ‘provide a service (resolution of disputes) and are compensated for that service by their clients (the disputing parties)’.24 Karton supports his position with an interesting collection of views from practicing arbitrators whom he characterizes as having a ‘service mindset’.25 Arbitrators, according to views expressed by those interviewed by Karton, regard themselves as having obligations to tailor their professional services to the needs and preferences of those who have retained them. Without doubting either the sincerity of those interviewed, or Karton’s insights drawn from the stated views, they do not provide a full account of the nature and role of the arbitrators.

9.15 The view of arbitrators as contractual service providers seems to reject any adjudicatory

function of arbitration.26 By extension, this view also seems to suggest that parties have almost unlimited contractual freedom. If arbitrators were doing nothing more than providing a service that was as interchangeable with other services such as taxidermy or hairstyling, then sophisticated commercial parties would have virtually unfettered contractual power to define their function and arbitral procedures.

9.16 Rau in fact endorses this approach, arguing that ‘[w]‌ith respect to the neutrality of the arbi-

trators . . . the only serious inquiry ought to be one into the understanding and underlying assumptions of the contracting parties’.27 One US judge has also effectively adopted this view, apparently not in jest, affirming that even dice rolling, arm-wrestling,28 or dart throwing would be a legitimate form of resolving disputes as long as agreed to by the parties. If dice rolling were in fact considered a viable form of resolving disputes, Judge Posner’s pithy conclusion that parties would be precluded from agreeing to ‘trial by battle, by ordeal, or by a panel of three monkeys’29 begins to sound like an undue limitation on contractual freedom. 22   Jivraj v Hashwani [2010] EWCA Civ 712 (English Ct. App.). Notably, the outcome of finding that arbitrators were service providers and employees of the parties was not to expand parties’ arbitral contractual freedom since the issue in the case was whether an agreement that required arbitrators to be appointed from the Ismaili Muslim Community was unlawful employment discrimination. 23 Karton, The Culture of International Arbitration 100. 24 Karton, The Culture of International Arbitration 100. 25 Karton, The Culture of International Arbitration 107. 26  As the Special Committee on Professionalism of National Academy of Arbitrators summarized: ‘There are those among us who view arbitration primarily as a business. They are likely to concentrate more on self-interest than the interest of the profession. . . . We recognize that arbitrators are no less ambitious than other professionals; we recognize that many of us are dependent on arbitration fees for a livelihood.’ Report of Special Committee on Professionalism of National Academy of Arbitrators, Daily Lab. Rep. (BNA) No. 106, E-1, E-4 (4 June 1987), cited in Alan Scott Rau, ‘Integrity in Private Judging’, 38 S. Tex. L. Rev. 485, 485 (1997). 27  Rau, ‘Integrity in Private Judging’ 487. Rau’s view, drawing primarily from the US experience, is that despite its dual nature, arbitration is best understood as ‘a process of private government and self-determination . . . should be understood through the lenses of contract rather than of adjudication’. Rau, ‘Integrity in Private Judging’ 487. 28  Team Design v Gottlieb, 104 S.W.3d 512 (Tenn. Ct. App. 2002) (reasoning that, as long as they were agreed to by competent parties who are ‘dealing at arm’s length’, even procedures such as ‘flipping a coin, or, for that matter, arm wrestling’ will be upheld under the Tennessee Uniform Arbitration Act). 29  Baravati v Josephthal, Lyon & Ross, 28 F.3d 704, 709 (7th Cir. 1994) (surmising that ‘short of authorizing trial by battle or ordeal or, more doubtfully, by a panel of three monkeys, parties can stipulate to whatever procedures they want to govern the arbitration of their disputes’).

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Squinting hard to see arbitrators’ duality Contrary to these views, the existence of a contractual relationship, and the fact that arbi- 9.17 trators provide a service pursuant to that contract, is not inconsistent with an adjudicatory function and related limitations that are necessarily implicated in that function.

B.  Squinting hard to see arbitrators’ duality Arbitrators’ duality can be difficult to discern, just as it is difficult to see both a duck and 9.18 rabbit at the same time. A clear and nuanced understanding of arbitrators’ dual status, taken up in Subsection 1, is an essential conceptual underpinning to various features of international arbitration. These features include the effect of parties’ agreement on arbitrator impartiality standards (Subsection 2), the existence and extent of arbitrator immunity (Subsection 3), arbitrators’ departure from express party preferences (Subsection 4), and the production of public and club goods in international arbitration (Subsection 5). 1.  The duality of arbitrators’ status An essential starting point for developing a clearer understanding of the arbitrator’s status is 9.19 to develop a description that does not rely exclusively on either a bare contract analysis or a superficial analogy to judges. Gary Born provides just such a nuanced definition. Specifically, he explains that ‘arbitrators’ status, rights and obligations are the result of a contract which operates within, and incorporates, a specialized legal regime – that regime being the international and national law framework governing the international arbitral process’.30 The combination of a contractual relationship and the legal framework of international arbitration, he explains, means that ‘[a]‌rbitrators do not merely provide the parties with a service, but also serve a public, adjudicatory function that cannot be entirely equated with the provision of service in a commercial relationship’.31 Born reaches this conclusion by analysing ‘the arbitrator’s contract as a sui generis agreement 9.20 specifying the terms on which this adjudicative function, requiring independence from the parties, is to be exercised vis-à-vis particular parties and on particular terms’. Under this reasoning an arbitrator’s status involves a contractual provision of services, but those services are of a ‘unique character’ that are intertwined with the requirements of adjudication. As examined in Chapter 7, one essential feature of adjudication is a decision-maker who is 9.21 independent from the parties and sufficiently impartial to be able to evaluate the facts and law.32 This minimal degree of impartiality, autonomous from the parties’ control and directions, is essential for arbitrators to perform the adjudicatory function by which the parties ultimately agreed to have their dispute resolved.33 A similar analysis was adopted when the UK Supreme Court reviewed the lower court 9.22 reasoning in Jivraj v Hashwani. In rejecting the English Court of Appeal’s reasoning that

 Born, International Commercial Arbitration 2022.  Born, International Commercial Arbitration 2028. 32  Jivraj v Hashwani [2011] UKSC 40, ¶41 (UK S.Ct.); see also Judgment of 28 March 1984, Raffineries de pétrole d’Homs et de Banias v Chambre de Commerce Internationale, 1985 Rev. arb. 141 (Paris Tribunal de grande instance) (‘an arbitrator—who is a judge, not a representative of the party that appointed him—must derive his judicial power from a single, common manifestation of the intentions of the parties to the proceedings, even though his appointment may have been initiated by one party alone’). 33 Born, International Commercial Arbitration 2028. 30 31

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators an arbitrator’s role ‘is no different from’ other types of professional engagement,34 the UK Supreme Court held that an arbitrator was not in a relationship of employment that would require a degree of subordination of the employee to the employer. The court reasoned: Although an arbitrator may be providing services for the purposes of VAT and he of course receives fees for his work, and although he renders personal services which he cannot delegate, he does not perform those services or earn his fees for and under the direction of the parties as contemplated [by authorities defining the nature of an employment relationship]. He is rather in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services.35

This analysis, as indicated by the UK Supreme Court itself, is consistent with the ‘general international legal understanding of the nature of an arbitrator’s engagement’.36 9.23 In reaching this conclusion, the UK Supreme Court also quoted from a 1904 decision by a

German court:

It does not seem permissible to treat the arbitrator as equivalent to a representative or an employee or an entrepreneur. His office has . . . an entirely special character, which distinguishes him from other persons handling the affairs of third parties. He has to decide a legal dispute in the same way as and instead of a judge, identifying the law by matching the relevant facts to the relevant legal provisions. The performance expected from him is the award, which constitutes the goal and outcome of his activity. It is true that the extent of his powers depends on the arbitration agreement, which can to a greater or lesser extent prescribe the way to that goal for him. But, apart from this restriction, his position is entirely free, freer than that of an ordinary judge.37

Both this reasoning and that of the UK Supreme Court draw the contours of the sui generis contract that establishes the adjudicative role of an arbitrator. Contractual provisions create service obligations, but those services are of a unique character in which the arbitrator is, and is required to be, independent from the parties and impartial. 9.24 Several features support the view that arbitrators are service providers. Arbitrators are

employed through a fee-based contractual arrangement; their jurisdiction is contractually determined through the arbitration agreement; and arbitrators self-report what has been described as a ‘service mindset’.38 Indicators of arbitrators’ role as justice providers are more subtle, but unequivocally establish that they are more than mere service providers. 2.  Limitations on contracting for adjudication

9.25 Parties have a great deal of latitude in deciding the procedures for arbitration, including

standards and procedures for constituting the arbitral tribunal. That power, however, is not unbounded.39 The adjudicatory nature of arbitration imposes certain boundaries of their contractual freedom to eliminate the impartiality of the tribunal, even though terms in the

34  Jivraj v Hashwani [2010] EWCA Civ 712 (English Ct. App.). The Court of Appeal held that an arbitration agreement requiring appointment of arbitrators solely from the Ismaili Muslim Community was unlawful employment discrimination under EU law that had been implemented in England. 35  Jivraj v Hashwani [2011] UKSC 40, ¶ 40 (UK S.Ct.). 36  Jivraj. Hashwani [2011] UKSC 40, ¶ 77 (UK S.Ct.). 37  Judgment of 18 May 1904, RGZ 59, 247 (German Reichsgericht). 38 Karton, The Culture of International Arbitration 107. 39  Bone ‘Party Rulemaking’ 1333 (examining ‘the question of how far parties should be allowed to shape their own procedures’ a question that ‘applies equally to arbitration and adjudication’).

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Squinting hard to see arbitrators’ duality arbitration agreement inevitably affect the impartiality obligations that may apply in particular cases. These limitations on arbitrator impartiality are not just another species of mandatory national 9.26 contract law similar to limitations on the capacity of the parties who can validly enter a contract. Limitations on what can be agreed on regarding arbitrators are an acknowledgment that the concept of adjudication itself implies some limitations on parties’ contractual autonomy.40 Some national legal systems permitted party-appointed arbitrators to be ‘non-neutral’, even 9.27 if, as examined in Chapter 8, this practice is largely outdated.41 Whatever contractual flexibility may exist for party-appointed arbitrators, the prevailing view is that parties cannot agree to have a non-neutral arbitral chairperson or sole arbitrator.42 In other words, parties cannot waive in an arbitration agreement the right to have a neutral or impartial decisionmaker. This limitation exists because an impartial decision-maker is an inherent part of the definition of adjudication, as examined in Chapter 7.43 Without an impartial adjudicator the parties would not be agreeing to an adjudication. Legislation44 and judicial decisions45 in many jurisdictions acknowledge these limitations. 9.28 As Born explains, ‘excessively one-sided mechanisms for selecting arbitrators (which unacceptably favor one party over the other)’ are generally not enforceable.46 In reaching its decision in Jivraj v Hashwani, the UK Supreme Court described how its finding about the status of arbitrators implied certain duties of impartiality. It emphasized that: ‘[t]‌he arbitrator is in critical respects independent of the parties. His functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party . . . [H]e must determine how to resolve their competing interests. He is in no sense in a position of subordination to the parties; rather the contrary. He is in effect a “quasi-judicial adjudicator” ’.47 National standards requiring impartiality are reflected in the International Bar 9.29 Associa­tion (IBA) Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines), which limit parties’ ability to agree to arbitrators ‘if there is an identity between a party and the arbitrator, if the arbitrator is a legal representative of a legal 40  One US court reasoned that the parties’ agreement regarding arbitrator selection ‘does not command less deference simply because it concerns a procedural rather than a substantive aspect of the parties’ decision to arbitrate’. Universal Reins. Corp. v Allstate Ins. Co., 16 F.3d 125, 129 (7th Cir. 1994). 41  See paras 8.38–8.39. 42  A few stray judicial decisions in the United States have held the contrary. See, e.g., Woods v Saturn Dist. Corp., 78 F.3d 424 (9th Cir. 1996) (rejecting claim that arbitral procedures unduly favoured employer where tribunal consisted of employer’s employees and dealers); Hottle v BDO Seidman, LLP, 846 A.2d 862 (Conn. 2004) (enforcing an award when arbitral tribunal ‘consist[ed] solely of directors and partners of one of the parties’); Westinghouse Electric Corp. v New York City Transit Authority, 623 N.E.2d 531 (N.Y. 1993) (enforcing an award when arbitration agreement required that ‘all questions of any nature whatsoever’ arising out of contract were to be decided by Chief Electrical Officer, an employee of one of the parties). These decisions are better understood as aberrations than as a distinct trend, as demonstrated by the absence in those decisions of sustained analysis or engagement of applicable sources. 43  See paras 7.23–7.28. 44  See, e.g., European Convention Providing a Uniform Law on Arbitration, art. 3 (‘An arbitration agreement shall not be valid if it gives one of the parties thereto a privileged position with regard to the appointment of the arbitrator or arbitrators.’) (cited in Born, International Commercial Arbitration 879). 45  See Born, International Commercial Arbitration 879 (citing court cases from France, Germany, Switzerland, and Italy that preclude arbitral tribunals appointed by, or unduly beholding to, one party). 46 Born, International Commercial Arbitration 1693. 47  Jivraj v Hashwani [2011] UKSC 40 (UK S.Ct.).

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators entity that is a party in the arbitration, or if the arbitrator has a significant financial or personal interest in the matter at stake’.48 9.30 While sophisticated parties can agree to almost anything in a contract, they cannot have that

contractual agreement treated as a binding judgment (i.e., as the outcome of an adjudication) without including the essential markers of adjudication. One essential marker is a minimal guarantee of impartiality on the part of the tribunal. This is not a very precise requirement since, as examined in Chapter 7, the term ‘impartiality’ can shift meanings depending on the functional role assigned to the adjudicator. Even if the exact contours of impartiality can shift, the contractually agreed-upon procedures must provide a minimal guarantee of impartiality, or the process is not an adjudication.49 If the outcome of an agreed-upon process is not an adjudication, it is generally not entitled to be treated as a judgment by a court.50

9.31 A narrow exception to this general rule exists in some legal systems, but it is an exception

that essentially proves the rule. Under a so-called ‘confession of judgment’ or ‘cognovit’, as it was known at common law, some systems allow a party to agree to entry of a judgment upon the occurrence or non-occurrence of an event and, in the absence of any opportunity to raise a defence, to be heard in an adjudicatory process, or to appeal from any judgment entered. Although this mechanism is available in some common law jurisdictions, many others prohibit the practice altogether.51 Those jurisdictions that do allow for a confession of judgment52 severely limit its use, restricting it to narrow types of claims, most typically to promissory notes and other contracts to pay a fixed sum.53

9.32 Like confessing a judgment in advance of a dispute, agreeing in advance to an overtly pre-

disposed arbitral tribunal or signficiantly lopsided procedures would similarly mean that the outcome of the case was effectively a foregone conclusion rather than an adjudicatory determination of disputed issues.54 If parties want to agree to adjudicate their dispute, they cannot avoid the essential features of adjudication. 48   This contractual limitation is, as explained by the Working Group, inherent in the nature of adjudication: ‘The Working Group supports the view that no one is allowed to be his or her own judge; ie, there cannot be identity between an arbitrator and a party. The Working Group believes that this situation cannot be waived by the parties.’ Explanation to General Standard 2, para. d. 49   See paras 7.38–7.41. 50  Settlement agreements resolve disputes, but if they are not voluntarily complied with, a party seeking to enforce the agreement must generally sue for breach of contract. 51  Liquidated damages clauses, which stipulate by party agreement the extent of damages in the event of contract breach, provide a similar analogy. Because they provide contractual means of pre-determining what would otherwise be damages determined by adjudication, parties’ ability to agree to such clauses are, in the United States, subject to limitations that they be reasonable and their reasonableness is assessed by a court. See Michael Pressman, ‘The Two-Contract Approach to Liquidated Damages: A New Framework for Exploring the Penalty Clause Debate’, 7 Va. L. & Bus. Rev. 651 (2013) (providing overview of academic debate over enforceability in the United States). Civil law jurisdictions generally enforce liquidated damages and penalty clauses, but allow a court to reduce the amount if it determines the agreed upon sum is ‘excessive’. See Pascal Hachem, ‘Agreed Sums in CISG Contracts’, 3 Belgrade L. Rev. 140, 141 (2011); see also Bruno Zeller, ‘Penalty Clauses: Are They Governed by the CISG?’ 23 Pace Int’l L. Rev. 1, 4 (2011) (analysing French and German law). 52  Many jurisdictions completely ban such agreements because of the obvious procedural concerns. See Isbell v County of Sonoma, 21 C3d 61 (1972). 53  Joseph E. Edwards, ‘Constitutionality, Construction, Application and Effect of Statute Invalidating Powers of Attorneys to Confess Judgment or Contracts Giving Such Power’, 50 A.L.R.3d 1158 (1978); E.R. Soeffing, ‘Warrants of Attorney to Confess Judgment: Requirements as to Signing, Sealing, and Attestation’, 3 A.L.R.3d 1147 (1978). 54  In re Utility Oil Corp., 10 F.Supp. 678, 681 (S.D.N.Y. 1934) (‘With all the arbitrators representing one party only, the party unrepresented would in some cases be at the mercy of his opponent and the result a foregone conclusion.’).

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Squinting hard to see arbitrators’ duality While exaggerated focus on the contractual nature of arbitration denies its adjudicatory function, it 9.33 would be equally problematic to ignore the effect of the parties agreement on the nature and meaning of even core adjudicatory values, like impartiality. Some courts have rejected the idea that the parties agreement has any bearing on their assessment of impartiality when reviewing awards under the standards of the New York Convention or national law.55 This reasoning ignores how terms like ‘partiality’ or ‘independence’ are inevitably shaped by the contours of the parties’ agreement. While party agreement cannot alter statutory terms, provisions in the parties’ agreement can 9.34 affect how those terms apply in particular cases. For example, ordinarily, shared nationality between a party and a party-appointed arbitrator would not raise ‘justifiable doubts’ about independence or questions about an arbitrator’s ‘evident partiality’. If, however, the parties had specified in their agreement that none of the parties should share nationality with any of the arbitrators, non-disclosure of this otherwise innocuous fact of shared nationality could raise justifiable doubts or concerns about evident partiality. Similarly, if an arbitral tribunal were to be selected from among a small, tight-knit trade group, connections to the parties that might otherwise give rise to ‘justifiable doubts’ about independence or suggest ‘evident partiality’ might instead seem innocuous because they were implicitly or explicitly agreed to by the parties.56 The dual status of arbitrators both implies limits on parties’ agreement, but also the contin- 9.35 ued relevance of parties’ agreement in assessing even seemingly static terms like ‘impartiality’ and ‘independence’. Parties can, through agreement, control many aspects of the arbitrator’s role, but they cannot assign a role that is inconsistent with adjudication if they expect the outputs by that arbitrator to be treated as an adjudication. 3.  Arbitrator immunity Competing visions of arbitrators’ status as either service providers or justice providers are also 9.36 relevant to the issue of arbitrator immunity. Also in this context, these simplified categories often do more to confuse than clarify the essential debate. The rules that actually govern immunity, however, illustrate the duality of arbitrators’ status. Most explanations for why arbitrators are entitled to immunity observe that they function as 9.37 adjudicators or justice providers.57 In this vein, explanations of immunity are often based on express analogies to judges, judicial functions, and the need for immunity to protect those functions. For example, one of the leading decisions by the House of Lords relies on this analogy to justify the grant to arbitrator immunity: [s]‌ince arbitrators are in much the same position as judges, in that they carry out more or less the same functions, the law has for generations recognised that public policy requires that they too shall be accorded the [same] immunity.58 55  See Gateway Techs., Inc. v MCI Telecomm. Corp., 64 F.3d 993, 996 (5th Cir. 1995); Lapine Tech. Corp. v Kyocera Corp., 130 F.3d 884 (1997); Fils Et Cables d’Acier De Lens v Midland Metals Corp., 584 F. Supp. 240, 242 (S.D.N.Y. 1984). 56  The IBA Guidelines on Conflicts acknowledge that not only application of fact, but standards themselves may shift depending on party agreement and expectations reflected in that agreement: ‘It may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialized pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, no disclosure of this fact is required where all parties in the arbitration should be familiar with such custom and practice.’ 57  See Julian M. Lew, ‘Introduction’, in The Immunity of Arbitrators 2–3 (Julian M. Lew ed., 1990) 58  Sutcliffe v Thackrah [1974] 1 All ER 859, 862 (House of Lords) (‘Those employed to perform duties of a judicial character are not liable to their employers for negligence. This rule has been applied to arbitrators for a very long time.’).

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators In a similar vein, a leading US decision explained, arbitrators exercise judicial functions and while not eo nomine judges they are judicial officers and bound by the same rules as govern those officers . . . They must of necessity be uninfluenced by any fear of consequences for their acts.59 9.38 Although this view is relatively pervasive in discussions of arbitrator immunity,60 there is

vocal minority that rejects prevailing assumptions about arbitrator immunity. These alternative views are inevitably based on arguments that arbitrators are not judge-like, but are instead simply service providers. For example, a dissenting view in another leading case by the House of Lords reasoned that an arbitrator: is indeed a person selected by the parties for his expertise, whether technical or intellectual, that he pledges skills in the exercise thereof, and that if he is negligent in that exercise he will be liable in damages.61

Adding to these few judicial precedents, a sizable chorus of scholars have similarly argued to limit or eliminate immunity.62 A leading voice, Peter ‘Bo’ Rutledge, argues that ‘[j]‌ust like doctors, lawyers, accountants, and exterminators, arbitrators are private professionals retained to perform services’.63 From this premise, Rutledge argues that [a]rbitrators . . . in cases of voluntary submission of disputes, should not be entitled to any form of legal immunity . . . [except] in the form of a contractual release—either adopted in the parties’ arbitration agreement or negotiated between the parties and the arbitrator.64

These and similar arguments are not only drawn from a starting point that arbitrators are service providers. They also seem to aim at reshaping or rejecting the sui generis nature of a contract to serve as an adjudicator. Rutledge, for example, regards his proposal as part of a larger commitment to maximizing ‘contractual freedom accorded to parties . . . over how to structure their system of private dispute resolution’.65 9.39 While most analysis of arbitral immunity seems to adopt either a duck or rabbit view of

the status of arbitrators, national immunity rules actually apply a more nuanced approach. 59   Babylon Milk & Cream Co. v Horvitz, 151 N.Y.S.2d 221, 224 (N.Y. S.Ct. 1956); see also Hoosac Tunnel Dock & Elevator Co. v O’Brien, 137 Mass. 424, 426 (Mass. 1884) (‘An arbitrator is a quasi-judicial officer . . . exercising judicial functions.’). 60  Austern v Chi. Bd. Options Exch., Inc., 898 F.2d 882, 886 (2d Cir. 1990) (‘We . . . agree that the nature of the function performed by arbitrators necessitates protection analogous to that traditionally accorded to judges. . . . Accordingly, we hold that arbitrators in contractually agreed upon arbitration proceedings are absolutely immune from liability.’); Wasyl, Inc. v First Bos. Corp., 813 F.2d 1579, 1582 (9th Cir. 1987) (holding that arbitrators are immune from suit because ‘[t]‌he functional comparability of the arbitrators’ decision-making process and judgments to those of judges . . . generates the same need for independent judgment free from the threat of lawsuits’); Int’l Union, United Auto., Aerospace & Agric. Implement Workers v Greyhound Lines, 701 F.2d 1181, 1185 (6th Cir. 1983) (finding that an arbitrator’s ‘purpose is “functionally comparable” to a judge and, consequently, he is clothed with an immunity that is analogous to judicial immunity’). 61  Arenson v Casson Beckman Rutley & Co.[1977] AC 405, 419 (Lords Kilbrandon and Fraser). 62  Emmanuela Truli, ‘Liability v. Quasi-Judicial Immunity of the Arbitrator: The Case Against Absolute Arbitral Immunity’, 17 Am. Rev. Int’l Arb. 383, 390–91 (2006) (noting how arbitrator immunity ‘protect[s]‌arbitrators from every claim against them arising from all kinds of possible and even willful misconduct on their part’). Peter Rutledge, ‘Market Solutions to Market Problems: Re-Examining Arbitral Immunity As a Solution to Unfairness in Securities Arbitration’, 26 Pace L. Rev. 113, 116 (2005) (recommending replacing arbitrator and provider immunity with damage caps and liability waivers): Susan D. Franck, ‘The Liability of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity’, 20 N.Y.L. Sch. J. Int’l & Comp. L. 1, 19 (2000). 63  Peter B. Rutledge, ‘Toward A Contractual Approach for Arbitral Immunity’, 39 Ga. L. Rev. 151 (2004). 64  Rutledge, ‘Toward A Contractual Approach for Arbitral Immunity’ 156. 65  Rutledge, ‘Toward A Contractual Approach for Arbitral Immunity’ 156.

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Squinting hard to see arbitrators’ duality Virtually all systems afford some type of immunity for arbitrators, but only very few systems afford the full extent of absolute immunity applicable to judges. The most signficiant jurisdiction that still applies near-absolute immunity to arbitrators is the United States.66 By contrast, and despite the rhetoric of English courts about links between judicial and arbitral immunity, the English Arbitration Act provides an exception to immunity for acts in bad faith.67 Meanwhile, most civil law jurisdictions also generally recognize relatively broad arbitrator immunity, but subject to exceptions for fraud or similar intentional misconduct.68 Even more important than the exceptions for arbitrator immunity is a rule that exists, in 9.40 various formulations, regarding arbitrators’ right to remuneration.69 In many legal systems, an arbitrator who fails to perform his or her duties may forfeit or be required to reimburse fees.70 Notably, this exception exists even in the United States, despite the otherwise almost absolute immunity.71 The potential for forfeited remuneration has been referred to as ‘a form of civil liability which 9.41 arguably contradicts principles of arbitrator immunity recognized in many jurisdictions’.72 It is better understood, however, not so much an exception to immunity. It is, instead, a realization that justice-provider immunity co-exists with a contractual relationship. The contractual basis for arbitrators’ status provides some justification for the exceptions to 9.42 immunity, even under the view that some form of immunity is inherent in their adjudicatory function. For example, wrongful resignation is often treated as a basis for depriving an arbitrator of immunity and subjecting him or her to forfeiture of remuneration or even civil liability for any resulting damages (i.e., wasted or increased expenses) to the parties.73 Despite efforts to characterize forfeiture of remuneration as a form of civil liability, that characterization cannot be convincingly borrowed from analogies to judicial immunity because judges are not compensated on a case-by-case basis. Forfeiture of remuneration is better understood as a contract remedy for fundamental breach of the arbitration agreement, such as when an arbitrator fails to produce an award or produces an award that, as a result of serious derogation, is unenforceable. In these respects, national law rules pertaining to arbitrator immunity have adopted in sub- 9.43 stance a nuanced recognition of the duality of arbitrators’ status that has often eluded both judicial and scholarly descriptions of the justifications for immunity.   Rutledge, ‘Toward A Contractual Approach for Arbitral Immunity’ 156.   English Arbitration Act 1996, §29(1). 68  See Born, International Commercial Arbitration 2064 (noting that most civil law jurisdictions, including Switzerland, Belgium, Finland, The Netherlands, Spain, and Germany, recognize broad arbitrator immunity, subject only to exceptions for fraud or similar intentional misconduct). 69  English Arbitration Act, 1996, §24(4) (‘Where the court removes an arbitrator, it may make such order as it thinks fit with respect to his entitlement (if any) to fees or expenses, or the repayment of any fees or expenses already paid.’). 70 Born, International Commercial Arbitration 2065. 71  E.C. Ernst v Manhattan Constr. Co., 551 F.2d 1026, 1033 (5th Cir. 1977) (finding that arbitral immunity did not apply because ‘the arbitrator has a duty . . . to make reasonably expeditious decisions’ and when an arbitrator fails to render a timely decision, ‘he loses his claim to immunity because he loses his resemblance to a judge’ and ‘has simply defaulted on a contractual duty to both parties’); Morgan Phillips, Inc., v JAMS/ Endispute, 40 Cal. App. 4th 795, 802 (Ct. App. 2006) (under California law arbitral immunity does not apply when an arbitrator refuses to issue an award because that failure is as a breach of contract that is not ‘integral to the arbitration process [but] rather, a breakdown of that process’). 72 Born, International Commercial Arbitration 2066. 73 Born, International Commercial Arbitration 2081. 66 67

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators 4.  Decision-making autonomy 9.44 Another indicator of the duality of arbitrators’ status is, on the one hand, their general

obligation to apply the law agreed to by the parties, and, on the other hand, their obligation to decline to apply that law in certain circumstances. It is almost axiomatic that arbitrators are obliged to apply the law selected by the parties. Failure to do so in some instances can be a basis for challenging an award.74 As Born explains, however, ‘the arbitrator’s mandate is not simply to apply the parties’ contract, or even the law chosen by the parties, but instead to apply the applicable law, including any relevant mandatory law provisions, in order to resolve the parties’ dispute in accordance with the law’.75 This duty is rarely made express, but is implied in the ‘adjudicative function’ and is part of fulfilling the ‘adjudicative mandate comparable to that of a judge’.76

9.45 This duty to apply the law, Born explains, ‘transcends, and in rare cases contradicts, the pro-

vision of a contractual service to the parties’77 and applies ‘even where fulfilling this mandate may be directly contrary to the parties’ agreement’.78 For obvious reasons, this duty is ‘highly sensitive’ and ‘seldom exercised’. As Born explains, however, it is ‘one that nonetheless lies at the core of the arbitrator’s mission’.79

9.46 These obligations exist because when modern parties opt for international commercial arbi-

tration, they are not simply selecting a form of dispute resultion. They are seeking an adjudication of their dispute.80 Several trends, which were examined in Chapter 1 but are worth re-examining here, demonstrate this intent and the implied obligation to, on occasion, deviate from parties’ express choice of law.

9.47 Up until the last several decades, international arbitration was primarily a means of dispute

resolution, predicated on informal decisional processes such as amiable compositeur and ex aequo et bono and the unwritten law of merchants81 or lex mercatoria.82 These doctrines permitted arbitrators to tailor their decisions to customary trade usages and to disregard the express terms of the contract or the clear provisions of applicable substantive law ‘for the sake of . . . giving something to both parties’.83

9.48 Dispute resolution techniques that aim primarily at finding an equitable result more readily

cast arbitrators as ‘service providers’. In that situation, arbitrators’ express purpose is to serve the parties’ collective interests by rendering an outcome that pleases both parties. Consistent

  See Born, International Commercial Arbitration 2049.  Born, International Commercial Arbitration 2049. 76 Born, International Commercial Arbitration 2049. 77 Born, International Commercial Arbitration 2049. 78 Born, International Commercial Arbitration 2049. 79 Born, International Commercial Arbitration 2049. 80  This presumption for adjudication is not universal. In some industries, and for simpler agreements involving lower dollar amounts, parties may well be contracting for a more free-form method of dispute resolution. The existence of exceptions, however, does not alter the core practices and assumptions with which most parties select international arbitration. 81  See generally, Thomas E. Carbonneau (ed.), Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant, rev. edn. (JurisNet, 1998); Michael Joachim Bonell, ‘The CISG, European Contract Law and the Development of a World Contract Law’, 56 Am. J. Comp. L. 1 (2008). 82  Yves Dezalay and Bryant Garth, Dealing in Virtue: International Arbitration and the Construction of aTransnational Legal Order (University of Chicago, 1996) 34. 83  F.A. Mann, ‘The Aminoil Arbitration’, 54 Brit. Y.B. Int’l L. 213, 214 (1983). See also John Beechey, ‘International Commercial Arbitration: A Process Under Review and Change’, 55-Oct Disp. Resol. J. 32, 32 (2000). 74 75

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Squinting hard to see arbitrators’ duality with this view, Born suggests that the one exception to an arbitrator’s ‘core mission’ as an adjudicator to apply the law is when the parties agreed to have their dispute resolved according to these doctrines.84 Modern parties and arbitration practices, however, have largely rejected this historical 9.49 model in favour of one that looks much more like adjudication, and less like informal dispute resolution. Modern trends in both substance and procedure are needed to resolve the dramatically more complex disputes that are being arbitrated today. As Stacie Strong explains, gone are the days when the typical case involved two parties, with a single contract involving relatively simple factual questions and relatively simple contract terms.85 On the substance, modern parties have largely rejected the doctrines of amiable composi- 9.50 teur, ex aequo e bono and lex mercatoria. Instead of these open-textured decisional methods, parties want their contracts enforced as written through law-bound decisions that apply national substantive law.86 In other words, parties want the outcomes of their disputes to be warranted by legal reasons. This shift in outcome preferences necessarily implies a shift away from simple resolution of disputes and toward formal adjudication. Determining what result is required by a given rule in relation to a particular factual situation implies an assessment that is independent of what an individual adjudicator subjectively believes the ‘right’ outcome to be.87 A law-bound determination, however, necessarily implies, as Born explains, that arbitrators sometimes ‘apply the applicable law’ even if not agreed to by the parties. This commitment to determining an appropriate, law-bound outcome of a dispute necessitates the sine qua non of the adjudicator—some degree of objectivity or impartiality necessary for rational analytic discernment of the law and application to the facts.88 This shift in substance has been accompanied by a corollary shift in procedure. In addition to 9.51 having allowed arbitrators substantive flexibility, historically the procedures for gathering and presenting evidence and argumentation were relatively malleable and were, as a practical matter, crafted on a case-by-case basis to suit the preferences and predilections of individual arbitrators and parties. As previously explained: new international arbitration ‘players’ [sought] transparency in the rules, procedures and institutional arrangements [because they were] impatient with customs and understandings not accessible to them, and they [were] suspicious of the idea that there [was] or [might have been] an inner ‘club’ of practitioners and arbitrators from which they [were] excluded.89 84 Born, International Commercial Arbitration 2049 (‘This adjudicatory function entails the obligation [of arbitrators] to decide the parties’ disputes in accordance with the applicable law (save in arbitrations ex aequo et bono or amiable compositeur).’). 85  S.I. Strong, ‘Increasing Legalism in International Commercial Arbitration: A New Theory of Causes, A New Approach to Cures’, 7:2 World Arb. & Med. Rev. 117, 118–25 (2013). 86  See Detlev Vagts and W. Michael Reisman, ‘International Chamber of Commerce Arbitration’, 80 Am. J. Int’l L. 268 (1986) (suggesting that ad hoc arbitration has declined in popularity because parties have traded off the ‘maximum suppleness’ offered by ad hoc arbitration for the predictability of institutionalized arbitration). 87  See Jules L. Coleman and Brian Leiter, ‘Determinancy, Objectivity and Authority’, 142 U. Penn. L. Rev. 549, 599 (1993). 88  See John Leubsdorf, ‘Theories of Judging and Judge Disqualification’, 62 N.Y.U. L. Rev. 237, 280–90 (1987); Coleman and Leiter, ‘Determinancy, Objectivity and Authority’, 599–600 and n. 85 (defining procedural objectivity: ‘a procedure for reaching decisions is objective by virtue of its relative freedom from partiality to one side or the other’). 89  James H. Carter, ‘International Commercial Dispute Resolution’, Disp. Resol. J., Apr. 1996, 95, 98.

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators In other words, substantially harmonized and standardized international arbitration procedures developed based on pressure from new players.90 In James Carter’s words: The arbitration world . . . has . . . articulate[d]‌and standardize[d] many of the aspects of international proceedings, so that newcomers will be able to find their way without undue difficulty . . . [T]he ‘unwritten’ procedures—those typically followed but not written into the formal rules and previously often passed down in internal administrative form—now appear in guidelines of all sorts available to the reader with access to a decent arbitration library.91

This transformation has been both celebrated and decried as the ‘judicialization’ of arbitration and, in some instances, the ‘Americanization’ of international arbitration.92 9.52 While there is considerable debate regarding the efficacy of some of these developments,93

one reason they have developed is as a result of party preferences for law-bound decisions and for greater predictability in the procedural arrangements. Use of the term ‘judicialization’ to describe this trend impliedly recognizes a justice-provider function for international arbitrators.

9.53 As disputes have became more complex, the legal and case management skills needed to resolve

them is also more complex than arbitral decision-making of years past. The rise of arbitrators as justice providers is not despite, but because of, the parties’ agreement. The duck and rabbit, in other words, can be seen together because service to the parties means embracing a justice function. 5.  Private arbitrators, public goods, and club goods

9.54 International arbitrators’ duality is also demonstrated by how ostensibly ‘private’ international

arbitrators produce ‘public goods’ and ‘club goods’.94 As Joel Trachtman explains, ‘[p]‌ublic goods are goods that are non-excludable and non-rival in consumption . . . [while] club goods 90   This phenomenon has been well documented and discussed in the literature. See Gabrielle KaufmannKohler, ‘Globalization of Arbitral Procedure’, 36 Vand. J. Transnat’l L. 1313, 1322–3 (2003) (referring to the development of ‘standard arbitration procedure’ that ‘merge[s]‌different procedural cultures’); Serge Lazareff, ‘International Arbitration: Towards a Common Procedural Approach’, in Stefan N. Frommel and Barry A.K. Rider (eds.), Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends (1999) 31 (referring to ‘an emerging “harmonised procedural pattern” ’). 91   Carter, ‘International Commercial Dispute Resolution’, 98. 92   See generally, R. Lillich and C. Brower (eds.), International Arbitration in the 21st Century:  Towards ‘Judicialization’ and Uniformity, Twelfth Sokol Colloquium (1993) (critiquing the need for balance between flexibility and certainty); Klaus Peter Berger, Private Dispute Resolution in International Business (2006) 303 (‘It is particularly in major, multi-million dollar arbitrations that the informal atmosphere . . . has given way to confrontation and litigation tactics, hitherto known only from proceedings before national courts. Over the past decades, the arbitral process has undergone a fundamental transformation which is often characterized as the “judicialization” of arbitration.’). 93  Critics of the ‘Americanization’ of international arbitration use the term to describe a growing ‘unbridled and ungentlemanly aggressivity and excess’ in arbitration, a ‘total warfare’, characterized by excesses of US-style discovery, and distended briefs and document submission. Yet, most scholars view the trend, not so much as ‘judicialization’ or ‘Americanization’, but rather as one of ‘harmonization’ or ‘homogenization’—a merging of common and civil law traditions. See Kevin T. Jacobs and Matthew G. Paulson, ‘The Convergence of Renewed Nationalization, Rising Commodities, and “Americanization” in International Arbitration and the Need for More Rigorous Legal and Procedural Defenses’, 43 Tex. Int’l L.J. 359, 364 (2008); Elena V. Helmer, ‘International Commercial Arbitration: Americanized, “Civilized”, or Harmonized?’ 19 Ohio St. J. on Disp. Resol. 35, 37 (2003); Nicolas C. Ulmer, ‘A Comment on “The Americanization” of International Arbitration?’ 16-6 Mealey’s Int’l Arb. Rep. 1 (2001); Lucy Reed and Jonathan Sutcliffe, ‘The “Americanization” of International Arbitration?’ 16-4 Mealey’s Int’l Arb. Rep. 11 (2001). 94  See David Luban, ‘Settlements and the Erosion of the Public Realm’, 83 Geo. L.J. 2619, 2623 (1995)(A ‘public good’ is a positive externality, meaning ‘a beneficial product that cannot be provided to one consumer without making it available to all (or at least many others)’). Jules Coleman and Charles Silver were the first to elaborate the theory that trials produce public goods, meaning things that benefit not only the parties but also

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Squinting hard to see arbitrators’ duality are non-rivalrous but excludible, such as a toll bridge’.95 Public goods come in the form of rulemaking, which provides guidance to future parties and arbitrator tribunals, while club goods come in the development of a uniquely skilled group of individuals who are capable of managing transnational disputes, and in the legitimacy of the international arbitration regime itself. With respect to rule-making, even in the absence of a formal system of stare decisis,96 and despite 9.55 the confidential and ‘private’ nature of international arbitration, arbitration proceedings generate procedural rules and practices, and to a lesser extent substantive rules, that serve as precedent for future arbitrations and beyond.97 Take, for example, the arbitrator-created rule that provides a basis for voiding contracts for bribery, even if bribery would not invalidate the contract under the law chosen by the parties and the issue of bribery was not raised by either party.98 This rule began as a procedural rule barring the exercise of arbitral jurisdiction, but later became a rule that allowed for the exercise of jurisdiction, but allowed arbitrators to invalidate a contract procured by bribery. The case establishing that rule was reported, elaborated on, and then incorporated into the rich literature regarding international arbitration procedure. Development of this precedent regarding corruption is but one example of how increasing 9.56 publication of awards can expand the effect of one decision on a specific topic in a particular case to future cases that raise similar issues.99 Once published, this rule and others like it are consulted by parties in arbitration, and familiarity with them may be said to measure an arbitrator’s professional sophistication and competence.100 third parties, because the opinions and precedents produced by private adjudication are ‘sources of information about things that can and cannot lawfully be done in a society’. Jules Coleman and Charles Silver, ‘Justice in Settlements’, 4 Soc. Phil. & Pol’y 102, 114–5 (1986). 95   Joel P. Tractman, The Future of International Law: Global Government (Cambridge University Press, 2013); see also Luban, ‘Settlements and the Erosion of the Public Realm’ 2623 (‘A “public good” is a positive externality, meaning “a beneficial product that cannot be provided to one consumer without making it available to all (or at least many others)” ’). Jules Coleman and Charles Silver were the first to elaborate the theory that trials produce public goods, meaning things that benefit not only the parties but also third parties, because the opinions and precedents produced by private adjudication are ‘sources of information about things that can and cannot lawfully be done in a society’. Coleman and Silver, ‘Justice in Settlements’ 114–5. 96   See Born, International Commercial Arbitration 100 (stating that published awards fail to ‘command stare decisis respect’ like a court decision). 97   See Cindy G. Buys, ‘The Tensions Between Confidentiality and Transparency in International Arbitration’, 14 Am. Rev. Int’l Arb.121,122–3 n. 7 (2003) (‘Although arbitral awards have no precedential value, the reasoning of the arbitrators may be persuasive to other arbitrators confronting the same or a similar issue.’). 98  For an extended discussion of this development, see paras 6.52–6.53. 99  See Kenneth Michael Curtin, ‘Redefining Public Policy in International Arbitration of Mandatory National Laws’, 64 Def. Couns. J. 271, 279 (1997) (‘Publication of arbitral awards . . . is becoming more common, thus alleviating the difficulties associated with a lack of precedent.’); Klaus Peter Berger, ‘International Arbitration Practice and the Unidroit Principles of International Commercial Contracts’, 46 Am. J. Comp. L. 129, 149 (1998) (stating that ‘arbitral awards more and more assume a genuine precedential value within the international arbitration process’); William Tetley, ‘Mixed Jurisdictions: Common Law vs Civil Law (Codified and Uncodified)’, 60 La. L. Rev. 677, 719 (2000) (‘With each passing year, there is an ever-increasing volume of reported arbitral awards (particularly in civil law jurisdictions, as well as in the United States), and arbitrators are tending more and more to refer to previous awards rendered in similar cases, thus gradually developing a system of arbitral precedent.’); cf. Bernard H. Oxman, ‘International Decisions’, 96 Am. J. Int’l L. 198, 205 (2002) (noting that with regard to non-commercial contexts ‘the [ICJ] has invoked other international arbitral awards . . . on [some] occasions, and has even brought some within the ambit of “precedents” that it will consider on a par with its own prior decisions’); Restatement (Third) of Foreign Relations Law § 103 (1986) (noting that while adjudicative opinions are not formally treated as stare decisis under international law, arbitral awards and other international court decisions have been treated as highly persuasive evidence of customary international law). 100  Unlike conventional domestic arbitration, in which arbitrators are most often industry specialists, international arbitrators, ‘like public court judges, tend to be generalists in substantive legal knowledge but specialists in legal procedure’. Christopher R. Drahozal, ‘Commercial Norms, Commercial Codes, and

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators 9.57 While international arbitration’s treatment of bribery may be among its most famous lines of

precedent, it is by no means the only procedural innovation. Arbitral awards involving unusual procedural rulings are often published for the express purpose of providing guidance to future arbitrators. One particularly important example is a tribunal’s decision in the infamous case of the kidnapped Indonesian arbitrator, which will undoubtedly be important precedent in any future case in which foul play has fallen upon a member of the tribunal.101

9.58 At a less dramatic and less observable level, international arbitration has also generated its

own set of hybridized evidentiary procedures designed to bridge gaps between civil and common law procedural traditions.102 The evolution of these now well-settled procedural norms, discussed at length in earlier chapters,103 occurred less through formal exchange of published opinions than through the human cross-pollination that comes with the overlapping experiences of those in the international arbitration community.

9.59 In addition to procedural precedents, certain substantive commercial rules have developed

and are used by arbitrators to supplement national choice of law provisions:

Recent scholars have noted that certain rules of law have taken on an international character and are being employed by arbitrators when resolving transnational disputes. Some of the principles upon which international arbitrators have regularly relied include, inter alia, the duties to bargain in good faith, to mitigate damages, and to renegotiate contracts, as well as numerous maritime issues.104

The complexities of rule-making for the transnational context and international arbitrators’ close and integral relationship to that context means that they are arguably more efficient and effective at creating certain types of transnational rules than actors in either the national or international legislative contexts could be.105 International Commercial Arbitration’, 33 Vand. J. Transnat’l L. 79, 96 (2000); Bryant G. Garth, ‘Diffusion and Transformation: Reflections on a Theme’, 4 Disp. Resol. Mag. 4, 5 (1998) (‘[T]‌he success of this transnational system of private justice has come in part through the development of a cadre of professional arbitrators, well-versed in arbitration techniques.’). 101   One commentator rightly applauds ‘the extraordinary fortitude and intellectual rigor with which the members of the Arbitral Tribunal approached their task in this case while in a virtually constant state of siege’. Marc J. Goldstein, ‘International Commercial Arbitration’, 34 Int’l Law. 519, 530 (2000). He further opines that ‘[i]‌nternational arbitrators and counsel for parties in such proceedings may well refer to these awards, for generations to come, for the guidance they provide in combating a deliberate campaign of sabotage against the arbitration proceedings by the state party’. 102  Kaufmann-Kohler, ‘Globalization of Arbitral Procedure’; Lara M. Pair, ‘Cross-Cultural Arbitration: Do the Differences Between Cultures Still Influence International Commercial Arbitration Despite Harmonization?’ 9 ILSA J. Int’l Comp. L. 57 (2002). 103  See paras 1.37–1.38. 104  Mark Garavaglia, ‘In Search of the Proper Law in Transnational Commercial Disputes’, 12 N.Y.L. Sch. J. Int’l & Comp. L. 29, 30–31 (1991). Interestingly enough, the substantive rule that contracts for bribery are void as against international public policy began as a procedural rule (the presence of bribery extinguished arbitral jurisdiction and rendered the dispute non-arbitrable), but evolved into a substantive rule of contract law that supplements parties’ choice of law. Some other examples of established ‘arbitral law’, which straddle the line between substance and procedure, include lines of arbitral decisions that address whether the signature on a contract of a state-owned entity is sufficient to subject the state itself to arbitral jurisdiction, and how the scope of an arbitral clause should be interpreted. See Goldstein, ‘International Commercial Arbitration’ 508. As one eminent commentator has explained, ‘on reading the ICC awards and their commentaries, one significant phenomenon becomes clear: the more recent awards are based on earlier decisions, and the decisions reached are generally consistent’. Emmanuel Gaillard, Berthold Goldman, and John Savage, eds., Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer International Law, 1999) 189. 105  See Sandeep Gopalan, ‘New Trends in the Making of International Commercial Law’, 23 J.L. & Com. 117, 117 (2004) (‘Increasingly, nation states are becoming less important in the creation of international

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Squinting hard to see arbitrators’ duality The effect of the substantive and procedural rules produced by international arbitrators is not 9.60 limited to application through informal precedent.106 Many of the rules developed in the international arbitration context have subsequently been relied on in legislative efforts to develop rules and laws that apply both within and outside the international arbitration context. For example, the drafting committee for the IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules) essentially codified the hybridized practices that were already in use in international arbitration.107 These IBA Rules can be adopted by parties to an international arbitration, which makes them formally binding on the arbitrators who are appointed to decide the dispute. With regard to substantive rules, international arbitration has become a resource for national 9.61 law-making. The commercial rules and norms developed by international arbitrators have been restated as lex mercatoria, and subsequently relied on, at least in part, by the efforts undertaken by the United Nations Commission on International Trade Law (UNCITRAL) in drafting the Principles of International Commercial Contracts,108 and by the drafters of the Vienna Convention on the International Sale of Goods.109 These legislative uses for the products of international arbitration demonstrate the ability of ‘private’ adjudication to engage in meaningful rule-making, some of which ends up guiding expressly public law-making and adjudication. Commentators, most of them well-known arbitrators, continuously call for increased trans- 9.62 parency through the publication of reasoned awards and an increased reliance on precedent in arbitral decision-making, even outside of the investment arbitration context.110 Moreover, international arbitration has conquered new areas as it has become incorporated into the commercial law with the growth of regional organizations, non-state actors, and international arbitration. This is spurred on by the march of globalization and the need for international commercial law.’). 106   Apart from arbitral proceedings, the international arbitration community affects the making of national policy, legislation, and jurisprudence through activities other than adjudication, such as lobbying or commission reports. See Dezalay and Garth, Dealing in Virtue 45–6. 107   As one commentator describes: ‘Drafted by a working party composed of arbitration specialists with civil law and common law backgrounds, the IBA Rules primarily restate and generalize practices that were already in use in international arbitration. These practices sought to achieve compromise solutions taking into account both common law and civil law approaches to evidentiary issues.’ Kaufmann-Kohler, ‘Globalization of Arbitral Procedure’ 1323. 108   See Klaus Peter Berger, ‘The Lex Mercatoria Doctrine and the Unidroit Principles of International Commercial Contracts’, 28 Law & Pol’y Int’l Bus. 943, 947–58 (1997). Significant debate surrounds efficacy of the lex mercatoria, and to a lesser extent the UNIDROIT Principles, in light of modern needs for the clarity and predictability that many suppose can only come from a fully developed national system. See Alejandro Garro, ‘The Contribution of the UNIDROIT Principles to the Advancement of International Commercial Arbitration’, 3 Tul. J. Int’l & Comp. L. 93, 112 (1995) (demonstrating the limitations of lex mercatoria because it requires ‘a search for diffuse rules found in, among other areas, trade usages, customs and legal scholarship’). 109  The United Nations Convention on Contracts for the International Sale of Goods (CISG) has been acceded to by the United States and thus applies as the governing law in all contracts between Americans and citizens of other signatory nations. Berger, ‘The Lex Mercatoria Doctrine’ 943 n. 120 (noting that the CISG may ‘be viewed as an attempt to codify rules and principles of the lex mercatoria’). 110  See William W. Park, ‘Private Adjudicators and the Public Interest: The Expanding Scope of International Arbitration’, 12 Brook. J. Int’l L. 629, 630 (1986) (calling for greater transparency in the arbitral process and more uniform rules of procedure and publication of awards as means to increase legitimacy and lawfulness of international commercial arbitration); see also Richard M. Buxbaum, ‘Introduction’, 4 Int’l Tax & Bus. Law. 205, 208 (1986); Thomas E. Carbonneau, ‘Arbitral Adjudication: A Comparative Assessment of its Remedial and Substantive Status in Transnational Commerce’, 19 Tex. Int’l L.J. 33, 39 (1984); Julian D.M. Lew, ‘The Case for the Publication of ‘Arbitration Awards’, in Jan C. Schultz and Albert Jan van den Berg (eds.), The Art of Arbitration (1982) 226–29; Bernardo M. Cremades and Steven L. Plehn, ‘The New Lex Mercatoria and the Harmonization of the Laws of International Commercial Transactions’, 2 B.U. Int’l L.J. 317, 336–37 (1984) (suggesting ‘the formation of institutions which give arbitrators access to prior arbitration awards and require them to follow a more or less strict rule of stare decisis’).

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators fixed landscape of trade-related disputes, which in turn has increased the rate of publication of awards and accentuated public aspects of the arbitral process.111 9.63 International arbitration produces precedents that, while not as systematic or authoritative

as a national common law network of cases, guide future parties and arbitral tribunals. These precedents increase the degree of certainty and order in future arbitral proceedings, even if they are not formally binding. As international arbitral decisions go beyond simply resolving disputes and instead generate rules for the international arbitration community,112 they are producing public goods.

9.64 Apart from its rule-making function, international arbitration also generates what Joel

Trachtman calls ‘club goods’, meaning goods that are available to all, but must be paid for.113

9.65 One such good is the increased integrity and legitimacy of the international arbitration regime

that is created and reified through repeated use. In the context of national legal systems, David Luban has argued that judicial authority can be conceptualized as a public good that is furthered by adjudication.114 He explains that when disputants rely on the judgment of a court to resolve their controversies, they ‘enhance the court’s claim as an authoritative resolver of controversies’.115 Under this view, litigants are ‘subsidiz[ing] judicial authority that is available for future litigants’.116 Even if Luban’s substantive position is overtly antagonistic to arbitration,117 it captures a more generalized insight, which can be fairly commandeered for international arbitration.118 Just as recurrent use of national courts enhances judicial authority, parties consistently resorting to international arbitration enhance the system and reinforce its legitimacy to the point that it is considered the uncontested preference for international parties.119 That authority and legitimacy, in turn, encourages parties to voluntarily comply with arbitral awards,120 which is

111   See Roger P. Alford, ‘The American Influence on International Arbitration’, 19 Ohio St. J. Disp. Resol. 69, 86 (2003) (‘The most important body of international arbitration jurisprudence emanates from . . . the IranUnited States Claims Tribunal. The significance of these decisions as persuasive authority is second to none.’). Alford also notes that published ‘NAFTA Chapter 11 awards [are] quickly becoming an important source of international arbitration jurisprudence’. 112   See Thomas E. Carbonneau, ‘The Ballad of Transborder Arbitration’, 56 U. Miami L. Rev. 773, 774 (2002) (‘In a word, [international commercial arbitration] has been a vital engine in the creation of a trans-border rule of law.’). 113   Joel P. Tractman, The Future of International Law: Global Government (Cambridge, 2013). 114  See Luban, ‘Settlements and the Erosion of the Public Realm’ 2623–24. 115  See Luban, ‘Settlements and the Erosion of the Public Realm’ 2623. 116  See Luban, ‘Settlements and the Erosion of the Public Realm’ (explaining that ‘authority has a “reflexive character”, meaning that increased authority inspires further use by litigants, which in turn increases the court’s authority’). 117  See Luban, ‘Settlements and the Erosion of the Public Realm’ 2623–24 (‘[W]‌hen litigants go elsewhere for resolution—private arbitration, non-governmental agencies, or private bargaining—the salience of adjudication fades and the authority of the court weakens.’). Luban also acknowledges that adjudication is not universally viewed as a public good, or as superior to other forms of dispute resolution. Judith Resnik is the most prominent proponent of this view. See Judith Resnik, ‘Failing Faith: Adjudicatory Procedure in Decline’, 53 U. Chi. L. Rev. 494, 535 (1986). 118  In reality, international arbitration is not effectively diverting cases from judicial adjudication, since domestic courts are largely unable to efficiently produce judgments that can be enforced outside the United States. Michael Reisman, et al., International Commercial Arbitration: Cases, Materials and Notes on the Resolution of Business Disputes (Foundation Press, 1997) 1215 (‘[A]‌rbitral awards as a whole enjoy a higher degree of transnational certainty than judgments of national courts.’). 119  As Thomas Carbonneau explains: ‘Because business transactions cannot take place without a functional system of adjudication, [international commercial arbitration] has enabled parties to engage in and pursue international commerce. As a result, it has had an enormous impact upon the international practice of law, the structuring of a de facto international legal system, and the development of a substantive world law of commerce.’ Carbonneau, ‘The Ballad of Transborder Arbitration’ 773. 120  General consensus is that the overwhelming majority of international arbitral awards are voluntarily complied with. Stavros Brekoulakis, ‘Enforcement of Foreign Arbitral Awards: Observations on the Efficiency

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Conclusion an essential precondition for the effective functioning of the system. The main difference under this analysis is that enhanced legitimacy of the judiciary is a purely public good, whereas the enhanced legitimacy of international arbitration is closer to a club good. Another club good that international arbitration produces is a group of highly skilled arbi- 9.66 trators. Just as trials may allow lawyers to hone their advocacy skills121 or judges to enhance their trial management skills,122 arbitrators can only become competent through experience arbitrating actual cases.123 As already examined, one of the primary inquiries parties make when selecting an arbitrator is into the prospective arbitrator’s past experience as an international arbitrator.124 Moreover, while some established training programmes exist for those who wish to become arbitrators, the most essential training is on-the-job training presiding over cases in tribunals and flanked by other seasoned arbitrators.125 The very nature of a club good, as something that is open to all but must be paid for, seems to 9.67 capture the duality of international arbitration and of international arbitrators’ status. Club goods provide a specific service to parties that is paid for, but they are available to all and through their use they are building seemingly public frameworks for effective global justice.

C. Conclusion In recent years, a number of examples suggest that public judges in national courts are taking 9.68 small steps to provide services more tailored to litigants’ preferences. For example, Germany is establishing special English language courts to provide an attractive judicial venue for resolving international disputes.126 Meanwhile, the Delaware Court of Chancery Business Arbitration programme was created to enable sitting Delaware Chancery Court judges to serve as arbitrators in business disputes, though the project was ultimately ruled unconstitutional.127 More generally, in the United States parties are increasingly contractually agreeing to modify court procedural rules, for example, by waiving certain procedures.128 In each of of the Current System and the Gradual Development of Alternative Means of Enforcement’, 19 Am. Rev. Int’l Arb. 415 (2008); see also Born, International Commercial Arbitration (‘Many international arbitral awards do not require either judicial enforcement or confirmation, because they are voluntarily complied with.’); Elisabeth M. Senger-Weiss, ‘Enforcing Foreign Arbitral Awards’, Disp. Resol. J., Feb. 1998, 70, 71–72 (‘The majority of arbitral awards are satisfied through the voluntary compliance of the parties involved.’). 121  Kevin C. McMunigal, The Costs of Settlement: The Impact of Scarcity of Adjudication on Litigating Lawyers, 37 UCLA L. REV. 833, 856–61 (1990). 122  See Luban, ‘Settlements and the Erosion of the Public Realm’ 2623–24. 123  See paras 2.12–2.14. 124  See Drahozal, ‘Commercial Norms, Commercial Codes, and International Commercial Arbitration’ 96–97. 125  See Pierre A. Karrer, ‘So You Want to Become an Arbitrator? A Roadmap’, J.World Inv. 13-5 (2013) (analogizing the process of becoming an arbitrator to the process of becoming an orchestra conductor—starting as an assistant and following in the footsteps of a mentor), . A similar phenomenon has evolved in domestic arbitration. Seth E. Lipner, ‘Report of the Shadow Arbitration Policy Task Force on Securities Arbitration Reform’, 1998 ABA Sec. Sec. Litig. 8 Arb. J-69, J-75 (discussing a proposal that ‘new arbitrators be required to observe at least two arbitrations before being added to the roster of arbitrators. This “hands-on” training, required of mediators, will improve the performance (and consistency) of apprentice arbitrators’). 126  Daniel Saam, ‘Book Review—Herman Hoffmann’s Kammern Für Internationale Handelssachen: Can Arbitration Serve as a Model for the Law of Civil Procedure?’ 14 German L.J. 949 (2013). 127  See Brian J.M. Quinn, ‘Arbitration And The Future Of Delaware’s Corporate Law Franchise’, 14 Cardozo J. Conflict Resol. 829 (2013). 128  Bone ‘Party Rulemaking’ 1386.

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Duck-Rabbits, a Panel of Monkeys, and the Status of International Arbitrators those contexts, various objections and practical challenges have been raised about the potential for judges to cross over to act like service providers. 9.69 Even if judges are less able to straddle the two roles, the duality of arbitrators as service

providers and adjudicators is perhaps one of their greatest strengths. It is what allows international arbitration to function as well as it does, and should be expressly acknowledged and accommodated, not denied by insisting on simplistic one-dimensional representations.

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10 CASTLES IN THE AIR AND THE FUTURE OF ETHICS IN INTERNATIONAL ARBITRATION Do not worry if you have built your castles in the air. They are where they should be. Now put the foundations under them. Henry David Thoreau

For some readers, the proposals of this book will seem to be nothing more than castles in 10.01 the air—pretty, ethereal aspirations that have little to do with the serious, practical business of resolving international arbitral disputes. The proposals may seem too ambitious or too far-reaching for a private regime like international commercial arbitration. These reservations are primarily advanced by two, sometimes overlapping groups. On the one hand, there are those who subscribe to the contractual vision of international arbitration, described in Chapter 9.1 Relatedly, this view is advanced by those who believe that the more simplified version of international arbitration of yesteryear still reigns. The earlier chapters of this book set out arguments for why these narrower visions of inter- 10.02 national arbitration cannot account for the modern contours and functions of international arbitration. The purpose of this final chapter is to suggest what a more holistic, complex understanding of international arbitration may mean for the future of ethical regulation of international arbitration. Before contemplating the future of ethics in international arbitration, it is helpful to ponder first what the future of international arbitration itself might look like.

A.  The future of international arbitration Even without a crystal ball, it is easy to imagine many inevitable features that will character- 10.03 ize international arbitration in the future. One inevitable trend, which was previewed in Chapter 1, mirrors what Fareed Zakaria dubbed in the context of geo-politics: ‘the rise of the rest’.2 It is almost a foregone conclusion that the number of parties, counsel, arbitrators, arbitral 10.04 institutions, and related personnel working around the world on international arbitration will dwarf the numbers that exist today. Anglo-American and European multi-national law firms already boast a virtual United Nations of attorney competence among their ranks3 and   See paras 9.10–9.16.   Fareed Zakaria, Post-American World and the Rise of the Rest (Norton & Co., 2008). 3  See paras 1.49–1.53. 1 2

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Castles in the Air and the Future of Ethics in International Arbitration will continue to open new offices in new jurisdictions. These law firms, however, will increasingly compete with a growing number of smaller boutiques and medium-sized regional firms that are founded in Asia, Africa, Latin America, and the Middle East. 10.05 Regional arbitral institutions, which already have some of the most dramatic caseload

growth in terms of overall number of cases, will increase competition among institutions, stimulate even more rapid procedural innovation, and contribute to development of sub-specializations within international arbitration.4 All institutions will continue to adapt to serve specialized trade and regional needs in new and creative ways.5

10.06 Technology will introduce increasing efficiencies in international law practice and arbitral pro-

ceedings, as well as new complexities in the underlying disputes. Online dispute resolution will itself become an established genre.6 Soon, third-party funding will likely cease being an interesting new phenomenon, and will instead be a fundamental fixture in arbitral disputes. Transparency, today debated as if it were a choice, will become an ever-more normal setting.7

10.07 Arbitration jurisidiction will continue its notorious creep outward. Bases for lassoing related

non-signatories will expand and become more internationally harmonized, as will doctrines to expand the preclusive effect of arbitral awards. Multi-party disputes will become increasingly normal, and, in response, procedures to consolidate related claims and accommodate the related increase in complexity will continue to evolve.

10.08 Cases with parties, counsel, and arbitrators from regions outside Europe and North America

are likely to involve significantly smaller dollar amounts, and more varied public policies and unfamiliar national laws. As a result, it may be less likely that arbitrators in these cases can readily internalize the hybrid service-justice function that characterizes the traditional model of the international arbitrator, as described in Chapter 9. Another related concern is that the panoply of cases will involve claims that are much more divisive than conventional international arbitration disputes. Various arbitral institutions and organizations are already actively engaged in efforts to train and develop local expertise for handling these new claims, and that essential function will continue.

10.09 As these and other demographic changes emerge in international arbitration, new challenges

will arise. The glue that will hold it all together, and ensure international arbitration meets those new challenges, is the collectivity of professionals who are the subject of this book.

B.  The future of ethics in international arbitration 10.10 Against the backdrop of these anticipated changes in international arbitration, it is easy to

imagine that there will also be important changes in the professional conduct and ethical 4  David B. Wilkins and Mihaela Papa, ‘The Rise of the Corporate Legal Elite in the BRICS: Implications for Global Governance’, 54 B.C.L. Rev. 1149 (2013). 5  One particularly interesting specialized arbitration institution is the new Jersusalem Arbitration Centre, which was founded to resolve commercial disputes between Palestinian and Israeli businesses. 6  Gabrielle Kaufmann-Kohler and Thomas Schultz, ‘The Use of Information Technology in Arbitration’, 5 Jusletter (2005), . 7  Jan Paulsson, ‘Universal Arbitration—What We Gain, What We Lose’, 79(2) Arbitration (2013) 185–94 (‘Failures of confidence. . . can be redressed by concrete measures of intelligent institutional design allowing for transparency, appraisal, and participation—while taking effective measures against entrenchment.’).

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The future of ethics in international arbitration norms of those who practice in international arbitration. As demonstrated in numerous examples in earlier chapters, practices that seem reasonable and normal one day can quickly become outdated, counterproductive, or subject to radically different ethical expectations. The absence of a duty for arbitrators to investigate potential conflicts seemed reasonable, until 10.11 it was not.8 Relying on arbitrators’ subjective personal discretion to decide whether to disclose a potential conflict of interest was accepted practice, until deemed too unreliable.9 Preparing witnesses was improper, until it became a common practice that overtook traditional national ethical rules. The practice of barristers from the same chambers appearing in multiple functions in the same proceeding was perfectly reasonable, until it was challenged as untenable.10 Unexplained institutional decisions about arbitrator challenges seemed fine, until they became regarded as an unseemly black hole.11 The very notion of outside funding of claims sounded shocking, until the abhorrence melted into acceptance and perhaps soon, even dependence.12 As new entrants arrive, and the nature and scope of arbitral proceedings evolve, expectations 10.12 about the professional conduct of participants are bound to change as well. When expectations about professional conduct change, express ethical guidance becomes an important means both to document the occurrence of the change, and to clarify the perimeters of the new ethical obligations. Expressly articulated ethical norms also provide an opportunity for meaningful discussion about the content of norms and the stakes involved among different options. The immediate challenge of counsel regulation Assumptions about how and where attorneys should be regulated are changing. Old assump- 10.13 tions that attorney ethics can and should be regulated only at the national level and only through formal bar discipline are being demonstrated to be obsolete. Transnational legal practice, particularly before courts and tribunals, raises unique regulatory issues that often elude traditional forms of national attorney regulation. Moreover, it no longer makes sense to exempt international tribunals from the overwhelming presumption that courts and tribunals should have their own rules and power to regulate attorney conduct in their proceedings. The erosion of traditional regulation is also attributable to the rise of a range of external 10.14 secondary regulation. Mechanisms such as malpractice claims, procedural rules, legislation aimed at law practice, and oversight by regulatory agencies are exercising increasing influence over old models of independent self-regulation by bar authorities.13 Since these new forms of regulation are no longer inextricably linked to national legal systems, they open new possibilities for new forms of attorney regulation at the international and transnational levels. When nationally trained and licensed attorneys appear before international tribunals, 10.15 they are not simply performing the same advocacy function in a new setting. International tribunals alter the roles of the advocates who appear before them.14 In performing these   See paras 6.84–6.89.   See paras 6.61–6.68. 10  See para 2.17. 11  See paras 2.67–2.72. 12  See paras 5.1–5.10. 13  See paras 6.38–6.40. 14  See paras 7.78–7.85. 8 9

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Castles in the Air and the Future of Ethics in International Arbitration new roles, the national ethical rules of those attorneys often become obsolete, if not inapposite.15 10.16 Practice before international tribunals is a distinctive ‘blend of international and domestic

concepts and procedures, [that requires] unique skills, experience, knowledge, strategic sense and training’.16 Since national legal training does not generally prepare attorneys for practice before international tribunals,17 professional competence often requires re-acculturation and re-training that reshape an attorney’s perception of their role as a domestic attorney into their distinct role as a global advocate. In other international adjudicatory contexts, this specialized role of counsel has been more expressly embraced.18

10.17 International arbitration has been slow to recognize and embrace this re-acculturation, and

in some instances, its cultural diversity has been a basis for denying the existence of any internal culture.19 The specialized role of global advocates, and their ethical implications, have been expressly acknowledged by other international tribunals, such as the International Criminal Tribunal for the former Yugoslavia, or ICTY.

10.18 The ICTY is made up of 25 judges from 23 different countries and ‘[t]‌he defense bar of

the ICTY has 257 members, drawn from multiple legal traditions, with roughly half of the defense bar from the former Yugoslavia’.20 As part of their participation in the ICTY proceedings, attorneys are explicitly retrained and culturally reorientated in order to develop professional and social norms that are essential to performing the role assigned to them by the ICTY. As a shorthand, this retraining can be summarized as taking ‘[c]ivil and common law lawyers’ and reorienting them to the ‘new hybrid trial model [of the ICTY] and their role within that model’.21 All attorneys at the ICTY undergo this reorientation. It has been particularly important, however, with respect to Soviet-era trained lawyers, who viewed the role of the criminal defence lawyer as an enemy of the state.22

15   See paras 7.77–7.85. cf. Carrie Menkel-Meadow, ‘Ethics in Alternative Dispute Resolution: New Issues, No Answers from the Adversary Conception of Lawyers’ Responsibilities’, 38 S. Tex. L. Rev. 407 (1997) (providing an overview on the difficulties of applying the ethics rules meant to govern lawyers in adversarial contests in the alternative dispute resolution context). 16  Richard J. Wilson, ‘Assigned Defense Counsel in Domestic and International War Crimes Tribunals: The Need for a Structural Approach’, 2 Int’l Crim. L. Rev. 145, 147 (2002). 17  This is less true today with the proliferation of international moot court competitions to accompany the proliferation of international tribunals themselves. For example, the Vis International Arbitration Moot draws hundreds of teams from around the world to Vienna and Hong Kong. (‘[P]‌articipation in the annual Willem C. Vis International Commercial Arbitration Moot Court as a student is a way of “marking” oneself to the seasoned members of international commercial arbitration as destined for greatness in the field.’) Benjamin G. Davis, ‘The Color Line in International Commercial Arbitration: An American Perspective’, 14 Am. Rev. Int’l Arb. 461, 516 (2003). 18  See McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals’ 148. 19  Joshua Karton, The Culture of International Arbitration and the Evolution of Contract Law (2013) 22 (‘[I]‌t may be contended that ICA cannot possess a culture [because] arbitrators are too heterogeneous to constitute a unified community, and. . . arbitrators’ actions are not reflexively conditioned by a common tradition.’). 20  See McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals’ 148. 21  McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals’ 148. 22  Mark S. Ellis, ‘The Evolution of Defense Counsel Appearing Before the International Criminal Tribunal for the Former Yugoslavia’, 37 New Eng. L. Rev. 949, 957, n. 91 (2003) (stating that ‘[m]‌any of the “qualified” non-western attorneys were trained in the communist/socialist era, in a system that is antithetical to the Tribunal’s substantive and procedural laws’).

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The future of ethics in international arbitration Once the new role of attorneys before the ICTY was established, new ethical norms appro- 10.19 priate to the new role were developed and eventually codified.23 All this occurred despite the fact that ‘[t]‌here was no shared history, background, or culture to help determine the best course of action’.24 Despite this re-acculturation and related new ethical rules, similar to international arbitra- 10.20 tion, attorneys at the ICTY still remain reluctant to engage in conduct that violates their home ethical norms. Similar to international arbitration, some attorneys in the international criminal law context believe that their national ethical rules still bind them when appearing before the ICTY.25 In a similar, although decidedly slower trend, international arbitration has been developing 10.21 rules and standards, for both counsel and arbitrators,26 and more recently exploring regulation of experts and third-party funders. The development of a fully functioning ethical regime for international arbitration, however, presents distinct challenges from those faced by the international criminal tribunals. In contrast to international criminal tribunals, international arbitration is a decentralized and 10.22 highly diversified network of ad hoc tribunals. The entities that are most long-standing and publicly prominent—arbitral institutions—have no formal or legal relationship to each other, even if they compete and coordinate with each other. States are intentionally cordoned off from arbitral proceedings and inter-connected only through treaty obligations to enforce agreements and awards. Meanwhile, national bar authorities and legislatures are involved in professional regulation of lawyers. These entities, however, do not have the insight and expertise either to develop specialized rules for international arbitration or to interpret and enforce rules that are being developed both on an ad hoc basis and by international professional and trade organizations. Each of these entities can and does have a role to play. There is, however, no clear allocation 10.23 of power and responsibility among them with respect to ethical regulation. To date, ethical regulation has been an experiment in real time, with tribunals and institutions trying out new rules and powers, and other entities responding to them. Much of the debate takes place in public fora such as international arbitration conferences, listserves, blog posts, symposia, and other gatherings. While these informational exchanges are invaluable for vetting ideas and assessing developments, there is a need for more express coordination. One essential need, often overlooked in the rush to develop international rules and guide- 10.24 lines, is express choice-of-law guidance. For example, the International Bar Association (IBA) Guidelines on Party Representatives include only an oblique indication in the preamble that: ‘the Guidelines are not intended to displace otherwise applicable mandatory laws, professional or disciplinary rules, or agreed arbitration rules that may be relevant or applicable to matters 23  See Ellis, ‘The Evolution of Defense Counsel’ 966–967 (outlining the development of the ICTY Code of Professional Conduct). 24  See McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals’ 148. 25  See McMorrow, ‘Creating Norms of Attorney Conduct in International Tribunals’ 142–143 (noting that the tension between home and ICTY ethical rules is alleviated in practice ‘by providing two or more defense counsel who can assign tasks among themselves based on their home jurisdiction rules’); Ellis, ‘The Evolution of Defense Counsel’ 959 (also noting the strategic ‘pairing’ of defence counsel). 26  For example, at the ASIL 2009 Annual Meeting, all four members on the panel on ethics in transnational legal practice agreed there should be some form of international ethics code and consequences for violations of counsel’s ethical obligations. Panel Discussion, Challenges of Transnational Legal Practice: Advocacy and Ethics at the American Society of International Law Annual Meeting (27 Mar. 2009).

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Castles in the Air and the Future of Ethics in International Arbitration of party representation. They are also not intended to vest arbitral tribunals with powers otherwise reserved to bars or other professional bodies’.27 By disavowing any effort to integrate national and international ethical norms, the IBA Guidelines have drawn criticism that instead of providing greater guidance, they add another layer of complication to attorney ethics.28 New efforts, such as those proposed for adoption by the London Court of International Arbitration (LCIA),29 may provide a meaningful workaround and way forward by incorporating ethical obligations and tribunal powers to enforce them into the parties’ agreement. 10.25 Appending ethical obligations to arbitral rules, and requiring attorneys to be made subject

to them either directly through a submission agreement or indirectly through party commitment regarding their counsel, allows clients to consent to modification to those national ethical rules that are default rules. For example, while national ethical rules impose on attorneys an obligation to maintain client confidences as secret, they also generally allow clients to consent or waive such obligations to facilitate representation.30

10.26 To make international ethical rules part of a fully effective regime of self-regulation, inter-

national arbitration practitioners will have to lobby national bar authorities for exemptions and choice-of-law rules. These reforms will acknowledge and accommodate international ethics and international tribunals’ formal enforcement role. The international arbitration community has already demonstrated an ability to effectuate such changes.

10.27 National bar authorities and courts can and should still play a back-up role in this regime.

While some critics suggest they would be reluctant to relinquish their domestic roles as primary regulators, several trends analysed in earlier chapters suggest this argument is contrary to existing practices. Almost uniformly, jurisdictions allow foreign attorneys to appear in locally seated international arbitrations without being locally licensed or having to abide by local ethical rules.31 Some bar authorities, such as in Switzerland, Belgium, and France, have created special carve-outs to witness preparation rules when attorneys appear before international tribunals. Such carve-outs could be expanded to the full range of ethical rules that should apply when attorneys appear before international tribunals. The United States, the Solicitors’ Regulatory Authority of England and Wales, as well as the Council of Bars and Law Societies of Europe or ‘CCBE’, have all developed choice-of-law rules that would create regulatory space for international tribunals.32 Together, these trends and examples demonstrate two realities. First, the international arbitration community has significant sway with national bar authorities. And, second, national bar authorities are not clamouring to regulate conduct before arbitral tribunals, but instead acknowledge that. Part and parcel to these realities—like virtually any other tribunal—international arbitral tribunals need to have their own rules and powers to regulate the conduct of attorneys appearing in their proceedings.

10.28 Complete passivity by national bar authorities, however, is not an option. An internationally

harmonized choice-of-law rule is needed. If national regimes adopt disparate choice-of-law

  IBA Guidelines on Party Representatives, Preamble.   Michael Schneider, ‘President’s Message: Yet another opportunity to waste time and money on procedural skirmishes: The IBA Guidelines on Party Representation’, 31:3 ASA Bull. 497, 499 (2013). 29  See paras 6.140–6.141. 30  For an extended analysis of the default nature of many national ethical rules, see Catherine A. Rogers, ‘Context and Institutional Structure in Attorney Discipline: Developing an Enforcement Regime for Ethics in International Arbitration’, 39 Stan. Int’l L. Rev. 1 (2002). 31  See paras 1.78–1.95. 32  See paras 3.23–3.29. 27 28

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The future of ethical self-regulation rules that all point in different directions, the confusion that has led to an ethical no-man’s land will be compounded, not ameliorated.33 Drafting and negotiating implementation of such a choice-of-law rule will provide a much needed opportunity for express coordination. It will build on existing consensus about the trend toward self-regulation, and provide a forum for specific analysis of the critiques of the trend.

C.  The future of ethical self-regulation The proposals in this book seem far-reaching and ambitious. But they build on features 10.29 that already exist in international arbitration practice, most importantly its reflexively self-regulatory nature. Some of the proposed innovations will not be immediately feasible, but are instead long-term goals that will hopefully materialize in international arbitration’s future. Some proposals may be contested, prove unworkable, or be displaced by even more radical, provocative changes. Debating, contesting, negotiating, and experimenting with various approaches are healthy, and even essential, parts of the process of developing and implementing ethical regulation. Some have questioned, and continue to question, the efficacy or even the possibility of 10.30 self-regulation of the professionals who are the custodians of international arbitration. Such questioning is not new, unexpected, or unhealthy. Any regime that relies on its own internal deliberations—on self-regulation—as a primary source of control and innovation must constantly self-assess and question even modest changes. Despite these questions, self-regulation of the professional conduct of participants in international arbitration is not a question that is open for debate. It is inevitable. The question is only how well it will be managed. In addition to avoiding potential risks of external regulation,34 international arbitration 10.31 should embrace self-regulation as an opportunity to reify its own legitimacy. The legitimacy of international arbitration is predicated in substantial part on the integrity and professional conduct of its founders and of its modern custodians—the arbitrators, counsel, experts, and administrators of arbitral institutions who manage and decide the disputes. These participants build and sustain the legal frameworks and procedures on which the legitimacy of international arbitration is founded. Clear ethical norms and a reliable enforcement regime are essential to that function. Clearer ethical regulation will also ensure that, when bad behaviour does occur, it is viewed as an aberration in an otherwise healthy system, rather than a symptom of lurking ethical pathologies. To the extent that this book has built castles in the air, that is where they should be. Any more 10.32 terrestrially bound aspiration would underestimate the needs and potential of international arbitration. The challenge now is to build the foundations beneath those castles. Ultimately, the challenge of ethical self-regulation is a challenge for international arbitration 10.33 to think beyond its present situation, to future generations and future developments in an 33  For an extended analysis of the need for such choice-of-law rules, see Catherine A. Rogers, ‘Cross-Border Bankruptcy as a Model for Regulation of International Attorneys’, in Making Transnational Law Work in a Global Economy: Essays in Honour of Detlev Vagts (Cambridge, 2010); Catherine A. Rogers, ‘Lawyers Without Borders’, 30 U. Penn. Int’l L. Rev. 1035 (2009). 34  See Introduction, pages 5–6.

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Castles in the Air and the Future of Ethics in International Arbitration ever-more globalized legal world. It is a challenge for international arbitration to bring to bear all the pragmatism, creativity, and sense of the noble duty to transnational justice that it has demonstrated in the very best moments of its history. 10.34 Undoubtedly there are some, even at this point in the book, who do not believe in castles

in the air, or the possibility that international arbitration could effectively and responsibly self-regulate the conduct of professionals who participate in it. To these sceptics, it is worth noting that, to the arbitration specialists of a few generations ago, today’s international arbitration would seem like a castle in the air. Practitioners of 20 years ago, let alone those who witnessed the signing of the New York Convention in 1958, would simply not believe all that international arbitration has become. As Michael Goldhaber so eloquently explains, international arbitration today capture[s]‌the political and economic cross-currents of our time. Investors have challenged bank regulators’ response to the global financial crisis, Greece’s debt restructuring, Germany’s ban on nuclear power after the Fukushima meltdown, Zimbabwe’s treatment of white farmers, the division of spoils after the breakup of Sudan, and Egypt’s economic relations with Israel after the Arab Spring.35

In this quotation, Goldhaber is referring specifically to investment arbitration. Investment disputes, however, represent only a small fraction of cases that have important global ramifications. 10.35 Many so-called commercial cases similarly capture the ‘political and economic cross-currents’

that Goldhaber describes, particularly those arising out of concession agreements or large infrastructure contracts, or that implicate transnational regulatory issues.36 International arbitration has, on so many fronts, argued that it should be entrusted with these disputes on the ground that they would be responsibly and effectively managed. It is time now to articulate formally and enforce expressly the professional commitments of those into whose hands that profound onus has been entrusted.

35  ‘The American Lawyer’s Arbitration Scorecard Profiles Secret Billion-Dollar Disputes, 274 International Arbitrations in All’, (quoting Michael Goldhaber). 36  See paras 2.18–2.22; 9.49–9.52.

372

INDEX adjudication adjudicators definition of functional role  7.28–7.29 impartiality 7.28 role of  7.23–7.32 meaning of  7.24–7.28 authoritative nature of adjudication  7.25, 7.29 jurisdictionally bounded decision  7.26, 7.29 American Arbitration Association (AAA) AAA/ABA Code of Ethics for Arbitrators (2004)  2.57, 2.67, 2.79 confidentiality obligations  2.126 disclosure obligations  2.113 duty to investigate conflicts of interest  6.85 meaning of standards of impartiality  2.85 national bar rules, and  2.94 neutrality of arbitrators  8.72 nominating only ‘qualified’ arbitrators  6.101 party-appointed arbitrators, pre-appointment communication with  8.78 removal of arbitrators  6.102 Canon of Attorney Ethics  1.46 Canons of Judicial Ethics  1.45 Code of Professional Responsibility  1.45 Commercial Arbitration Rules  2.57, 3.07 experts’ standards of conduct for  4.23–4.25 ICDR, founding  1.32 independence obligation  4.68 sanctions 3.07 improper non-disclosure, for  2.82 American Bar Association  9.06 AAA/ABA Code of Ethics see under American Arbitration Association (AAA) amiable compositeur  1.16, 1.35, 9.47, 9.50 arbitral institutions arbitrator challenges see arbitrator challenges arbitrators 6.143–6.144 appointing and removing  2.39, 6.100–6.102, 6.105 fees, control over  6.97–6.98 misconduct of arbitrators, response to  6.105 refusing to appoint  2.78, 6.100 removal from lists  6.102 confidentiality 6.106–6.107 control over processes for challenging arbitrators  2.61–2.64, 6.100–6.107 publication  2.68–2.69, 6.91–6.92, 6.107, 9.62 transparency  6.93, 6.96, 6.106 disclosure and challenge standards  6.68–6.69 increasing transparency of  1.38 ethical duties of arbitrators  2.52–2.78 fairness obligations  6.106 finality clauses  2.72–2.77, 6.93 increased case-loads in regional centres  1.33 increased scrutiny of arbitrators  1.24 no formal or legal relationship to each other  1.108

proliferation of  1.32 regional institutions  1.33, 1.34 role in monitoring arbitrators  1.08, 6.104 third-party funding, effect of  5.13 arbitral procedures/rules ‘Americanization’ of  1.101 arbitral rules  2.52–2.78 choice-of-law see choice-of-law cross-examination see under witnesses disagreements about  2.34 disclosure 3.02–3.03 early arbitration, in  1.14–1.18, 2.22 ethical rules as mandatory rules  3.08, 3.39 finality clauses  2.72–2.78, 6.93 independence and impartiality of arbitrators 2.53–2.54 enforcement of  2.54 need to set internationally-neutral procedures  2.20 procedural rules as default rules  3.08 selection of arbitrators  2.52–2.53 transparency, and  2.20 witnesses see witnesses see also selection of arbitrators and marketplace for arbitrator services arbitration see arbitral institutions; arbitrators; international arbitration arbitrator challenges arbitral institutions’ control over processes  2.61–2.64, 6.100–6.107 publication  2.68–2.69, 6.91–6.92, 6.107 transparency  6.93, 6.96, 6.106 basis for rulings not disclosed  6.91 challenge standards  2.31 clarifying 2.67 final/conclusive decisions  2.72–2.77 improper non-disclosure, consequences of  6.102 information about challenges  2.42 investment arbitrations  8.40 national courts  2.63, 2.89, 6.93–6.95 potential for abuse  2.63, 2.66 procedure  2.63, 6.90 publication of decisions  2.68–2.69, 6.91–6.92, 6.107, 9.62 increased transparency  6.93, 6.96, 6.106, 9.62 unsuccessful challenges, consequences of  2.65–2.67 arbitrators 2.01–2.131 active professionals, drawn from  7.19 arbitral institutions, regulating see under arbitral institutions attracting work as counsel, arbitrator status  1.41 barriers to entry for arbitrator services  2.03 ‘carte’, as  2.03 certification or licensure  6.108–6.116 chairpersons see chairpersons challenges to see arbitrator challenges confidentiality obligations  2.125–2.127

373

Index arbitrators (cont.): maintaining confidentiality/privacy of proceedings 7.20 counsel misconduct, and  3.93–3.98 arbitral tribunals redressing  3.94–3.95, 6.132–6.136 awards of fees and costs  6.158 disincentives for arbitrators to sanction for  6.146 incentives for arbitrators to sanction for  6.143 need for direct powers over attorneys  3.96–3.98 sanction awards  6.165 decision-making autonomy  9.44–9.53 disqualification disclosure obligations see disclosure obligations issue conflicts see issue conflicts purpose of  2.109 standards 2.109 dissenting opinions see dissenting opinions early modern arbitration system, in  1.15–1.19 doctrines facilitating informal decisional process 1.16–1.17 shared understanding of ethical conduct  1.02, 1.19 ethical duties see ethical duties of arbitrators evidence evaluation by formal rules  1.35 ex parte communications see ex parte communications fees see under fees immunity see immunity of arbitrators impartiality see impartiality and independence of arbitrators independence see impartiality and independence of arbitrators inherent authority  6.152, 6.163 investment arbitrators see investment arbitration judges, compared to  7.19, 7.23 national courts, and see under national courts new participants  1.34 party-appointed see party-appointed arbitrators regulation 2.01–2.07 challenges to arbitrators increasing  1.24, 2.06 focus on substance of obligations  2.07 insulation from market-based regulation/public scrutiny 2.03 international bodies, regulation by  2.04 national bar authorities, courts and legislatures, rulings of  2.05–2.06 sanctions, absence of  2.02–2.03 self-regulation see under self-regulation standards and rules  1.24 whether over-regulated or under-regulated 2.01–2.06 selection see selection of arbitrators and marketplace for arbitrator services self-regulation see under self-regulation status see status of international arbitrators third-party funders, and see under third-party funders training and licensing, no special form of  2.02 vocation as service-providers  1.08 wrongful resignation  9.42 young arbitrator groups  2.40 Association of Litigation Funders in England and Wales (ALF) 5.111–5.121

attorney-client privilege see confidentiality and attorney-client privilege attorneys see counsel/attorneys Australia conflicts of interest  3.60 contingency fees  3.80 expert witnesses  4.02, 4.05, 4.26–4.30 oaths 4.99 inadvertent disclosure of confidential documents 3.51 Incorporated Legal Practices  5.05 maintenance and champerty  5.39 pre-testimonial communication with witnesses  3.47 third-party funding  5.08 attorney-client privilege  5.66 bar associations see national bar associations Belgium attorney’s duty of confidentiality  5.67 coaching witnesses  3.34 pre-testimonial communication with witnesses  3.45, 3.47, 6.160, 10.27 Benson, Cyrus  6.131, 6.140 Bishop, Doak  3.77, 6.131 Black, Julia  6.14, 6.25–6.28, 6.42, 6.78, 6.96 Born, Gary  1.90, 2.24, 2.62, 6.47, 6.75, 9.19–9.20, 9.28, 9.44–9.45, 9.48, 9.50 Braithwaite, John  6.21–6.24, 6.28, 6.55, 6.95, 6.159 Canada conflicts of interest  3.60 contingency fees  3.80 disclosure of documents  3.49 inadvertent disclosure of confidential documents 3.51 expert witnesses  4.02, 4.05, 4.26–4.30 oaths  4.71, 4.99 maintenance and champerty  5.39 pre-testimonial communication with witnesses  3.47 Carter, James  2.20, 9.51 chairpersons  7.88–7.90, 8.82 nationality of  2.117, 2.119, 7.90 neutrality, requirement of  9.27 role 7.88 selection of  8.78, 8.82 challenges to arbitrators see arbitrator challenges Chartered Institute of Arbitrators  2.83 certification programme  6.110–6.111 experts  4.56, 4.65 party-appointed arbitrators, pre-appointment communications with  8.78 Protocol on use of party-appointed experts  4.65 Checklist of Ethical Standards for Counsel in International Arbitration  6.131, 6.140 Chile  1.89–1.90, 1.95 China attorneys 7.62 China International Economic and Trade Arbitration Commission 1.91 experts 4.56 restrictions on foreign lawyers in international arbitration  1.60, 1.90–1.92, 1.95, 1.100

374

Index choice-of-law choice-of-law clauses, national law usually applying to 1.36 choice-of-law guidance for ethical rules  1.66, 3.26 ethical conflicts, counsels’  3.23–3.29 pre-testimonial communication with witnesses 3.39–3.47 rules of host jurisdiction applicable to counsel  3.16 club goods see public goods and club goods Cohen, Julius Henry  5.138 compensation see fees confidentiality and attorney-client privilege arbitrators’ confidentiality obligations  2.125–2.127 maintaining confidentiality/privacy of proceedings 7.20 attorneys’ confidentiality obligations  3.51 differing conceptions of  3.64–3.69 third-party funding  5.65–5.68 civil law countries  3.64–3.65 inadvertent disclosure of privileged documents  3.51 third-party funding  5.12 attorney-client confidences, and  5.65–5.68 conflicts of interest  1.38, 2.74 arbitrator challenges see arbitrator challenges attorneys civil law systems  7.59 common law system  7.60 conducting ‘conflict checks’ before representing clients 7.22 counsel and arbitrator from the same chambers  2.17, 6.81–6.83, 6.152–6.153 different national ethical standards  3.55–3.61 disclosure of conflicts arbitrators  2.54, 2.58, 6.61–6.83 experts 4.64 duty to investigate potential conflicts of interest  2.55, 2.85, 2.115, 6.84–6.88 national law  6.87 IBA Guidelines on Conflicts of Interest in International Arbitration see under International Bar Association (IBA) internal conflicts of interest, disclosure and  2.114 nature of  2.49 third-party funding, effect of  5.12 contingency fees see under fees Corporate Counsel International Arbitration Group 8.103 Council of Bars and Law Societies of Europe (CCBE) attorney-client privilege  3.67 choice-of-law guidance  3.26–3.27, 10.27 Code of Conduct (1988/2006)  1.71, 1.73, 3.26–3.27, 3.87, 3.88 confidentiality 3.67 conflicts of interest  3.58 contingency fees  3.80 Declaration of Perugia on Principles of Professional Conduct (1977)  1.46, 1.69, 3.85 counsel/attorneys 3.01–3.103 advocates’ role, defining  7.33–7.35 arbitration agreements, not party to  3.08 attorney-client privilege see confidentiality and attorney-client privilege

375

civil law attorneys collaborative role of  7.43, 7.44 ethical obligations in comparative perspective 7.58–7.59 independence from clients  7.46–7.47 common law model  7.49, 7.52 confidentiality see confidentiality and attorney-client privilege conflicts of interest  7.22 disqualification  3.94, 6.147–6.158, 6.163 ethics in international arbitration/ethical conduct 3.10–3.29 a-national ethical rules in arbitral proceedings, effect of  3.18–3.28 a-national legal ethics  3.11–3.17 alleged misconduct  1.25 calls for increased guidance/standards  1.25 choice-of-law/conflicts-of-law problems 3.23–3.29 double deontology problem  3.19–3.20 enforcement 3.93–3.99 ethical challenges  1.25 ethical rules of arbitral seat, applying  3.13–3.17 ethical uncertainty  3.05 future of ethics/challenge of counsel regulation 10.13–10.28 importance of  1.25 internationalization 3.84–3.92 guerrilla tactics see guerrilla tactics national standards, reliance on  3.01–3.03, 3.08, 3.12 new developments  1.38 procedural fairness  3.21–3.22 see also Guidelines on Party Representation in International Arbitration under International Bar Association (IBA) fees see under fees misconduct 3.93–3.98 arbitral tribunals redressing  3.94–3.95, 6.132–6.136 awards of fees and costs  6.158 disincentives for arbitrators to sanction for  6.146 incentives for arbitrators to sanction for  6.143 need for direct powers over attorneys  3.96–3.98 sanction awards  6.165 national courts, regulation by  6.34–6.35, 6.44 national differences in ethical rules  3.30–3.83 attorney fees  3.79–3.83 confidentiality and attorney-client privilege 3.64–3.69 conflicts of interest  3.55–3.63 see also conflicts of interest creativity, aggression and bad manners  3.73–3.78 information disclosure and documents exchange 3.48–3.54 see also disclosure obligations witness communication, improper influence and perjury 3.32–3.47 see also witnesses zealousness  3.75, 3.77–3.78, 7.62 new participants  1.34 professional independence  5.58, 7.59–7.60 third-party funding, and  5.59–5.62

Index counsel/attorneys (cont.): regulation in international arbitration  1.73–1.104, 1.105–1.106 demographics see demographics in global and international arbitration practice development of codes of practice/ standards 3.07–3.08 ethical void partly by design  1.76–1.77 existing international standards  3.85–3.92 Hague Principles and Guidelines on Party Representation 1.74–1.75 jurisdictions hostile to foreign lawyers in international arbitration  1.88–1.95 jurisdictions that seek to attract international arbitration 1.78–1.87 need for  3.06 rules particular to relevant tribunal, need for  1.73 self-regulation see under self-regulation traditional regulation  1.105 uncertainty as to which ethical rules apply 1.05–1.07 right to be represented by counsel  1.76–1.77 foreign attorneys exempt from applicable regulations  1.77, 1.78 self-regulation see under self-regulation third-party funders, and see under third-party funders withdrawal from representing clients  5.134 Court of Arbitration for Sport  8.29 cross-examination see under witnesses Damaška, Professor Mirjan  7.15 demographics in global and international arbitration practice 1.96–1.104 advantages of foreign firms for local attorneys 1.99–1.100 domination of international arbitration by US/UK  1.96, 1.101 effects of US/UK firms on local markets  1.97–1.100 devil’s advocates see under party-appointed arbitrators Dezalay, Yves  6.131 disclosure obligations AAA/ABA Code of Ethics specifying  2.67 arbitrators’ duty to disclose  2.54, 2.58, 6.61–6.83 categories of information  2.85 conflicts of interest see under conflicts of interest disqualification 2.07 document and information exchange/pre-trial discovery 3.48–3.54 attorney’s ethical obligations  3.48–3.49, 3.51, 3.52, 3.54 e-discovery 3.50 inadvertent disclosure of privileged documents  3.51 international arbitration, nature of in  3.53–3.54 outsourcing documents management  3.50 preservation of documents  3.50 expansion leading to increased challenges  1.24, 2.67 IBA Evidence Rules, under  4.60–4.64 ICC rules  2.58–2.60 Independence/impartiality see under impartiality and independence of arbitrators sanctions for improper non-disclosure  2.82 standards of  2.07

dissenting opinions Functional Thesis and ethics of  7.92–7.99 party-appointed arbitrators  8.60, 8.61, 8.62–8.69 concerns about  8.42, 8.62–8.65 restraint over  8.75 Dworkin, Ronald  8.02 economic competition in international arbitration 1.39–1.42 Elliott, Donald  4.87 ethical duties of arbitrators AAA/ABA Code of Ethics for Arbitrators see under American Arbitration Association (AAA) code of ethics for arbitrators  2.79–2.89 codes of arbitration institutions  2.79–2.82 codes of other institutions  2.84–2.84 conflicts of interest see conflicts of interest IBA Rules of Ethics for International Arbitration see under International Bar Association (IBA) independence/impartiality see impartiality and independence of arbitrators sanctions for non-compliance not publicized  2.82 sources of international arbitrators’ ethical duties 2.49–2.100 arbitral institutions and rules  2.52–2.78 code of ethics for arbitrators  2.79–2.89 international conventions  2.90–2.91 liability standards  2.96–2.100 national bar associations  2.92–2.95 national law and national courts  2.88–2.89 shared sense of duty historically  2.13, 2.49 substantive ethical obligations  2.101–2.131 competence and diligence obligations  2.124 conducting arbitration in accordance with arbitration agreement  2.121–2.123 confidentiality obligations  2.125–2.127 criminal misconduct, obligations in light of  2.129 independence/impartiality see impartiality and independence of arbitrators obligation to propose/not to propose settlements 2.128 other ethical obligations  2.120–2.129 written codes of ethics, development of  1.46, 1.48 ethics AAA/ABA Code of Ethics for Arbitrators see under American Arbitration Association (AAA) arbitrators see ethical duties of arbitrators counsel/attorneys see under counsel/attorneys ethical no man’s land  1.03–1.04, 1.24 experts/expert witnesses see under experts/expert witnesses future of ethical self-regulation  10.29–10.35 future of ethics in international arbitration 10.10–10.28 immediate challenge of counsel regulation 10.13–10.28 IBA Rules of Ethics see under International Bar Association (IBA) international substantive ethical rules see Functional Thesis

376

Index investment arbitration see under investment arbitration European Union CCBE see Council of Bars and Law Societies of Europe (CCBE) cross-border practice  1.59 evidence evidence gathering rules more formal  2.20 formal rules standardizing evaluation  1.35 IBA Rules for Taking of Evidence see under International Bar Association (IBA) practice guidelines and protocols  1.35 ex aequo et bono  1.16, 1.35 ex parte communications  3.70–3.72, 4.68, 4.92, 8.39 civil law systems  3.70–3.71, 7.43, 7.59 experts/expert witnesses  4.01–4.106 attorneys, relationship with  4.10–4.13, 4.18, 4.94 biases 4.31–4.37 anchoring bias  4.32 cognitive and heuristic biases  4.32–4.33 neutral experts  4.36–4.37 civil law systems  4.15, 4.31–4.38 common law systems  4.02, 4.09–4.14, 4.18–4.30 comparative differences in expert witnessing 4.08–4.46 costs of unethical expert witnessing  4.06 criticisms and exceptions  4.17–4.46 national differences in expert witnessing 4.09–4.16 England, Australia and Canada  4.26–4.30 expanded role  1.26, 4.01 Germany, Italy and the Netherlands  4.31–4.38 ‘hot-tubbing’  4.28, 4.103 importance of  4.02, 4.10, 4.11 international arbitration, expert witnesses in 4.47–4.81 disclosure obligations under IBA Evidence Rules 4.60–4.64 efforts to clarify standards for expert ethics 4.59–4.70 expert teaming/Sachs protocol  4.57, 4.103 expert witness traditions and innovations  4.48, 4.54–4.58, 4.86 IBA Evidence Rules  4.55–4.56, 4.60–4.69 independence obligations  4.65–4.70 proposals for expert witness oaths  4.71–4.81 reforms as flexible options  4.50, 4.54 witness conferencing  4.58, 4.103 joint conferencing  4.28–4.29 national legal and cultural differences regarding nature and function  4.02–4.03 not directly regulated by national legal systems  4.04–4.05, 4.51 party-appointed/partisan experts  4.18–4.21, 4.38 role of  4.84, 4.91 perjury 4.72–4.81 deterrent effect of oaths  4.73 justification and belief  4.76–4.80 testimony as opinion not fact  4.74–4.75 procedural reforms  4.82–4.103 clearer role definition  4.89–4.94

structural reforms for reshaping expert witness roles 4.98–4.103 traditional oaths and certifications for experts 4.95–4.103 professional conduct  1.09 participation in arbitration less inherently constrained 1.26 public international tribunals, expert mechanisms in 4.39–4.46 direct appointment of experts to tribunals 4.42–4.43 experts appearing as counsel  4.41 party-appointed and tribunal-appointed experts 4.40 WTO two-phase procedure  4.44–4.45, 4.58 tribunal-appointed/neutral experts  4.14–4.15, 4.21–4.22, 4.30–4.38 role of  4.83, 4.91 United States  4.02, 4.09–4.14, 4.18–4.25 fees arbitrators’ fees  7.11119 control over  6.97–6.98 forfeited remuneration  9.41–9.42 attorneys’ fees  3.79–3.83 contingent fees  3.76, 3.80–3.83 arguments for  3.82 professional independence of counsel  5.59–5.62 use in international commercial disputes  3.83 fee-splitting 5.63–5.64 Fox, Catherine  3.74 France attorneys 7.45 confidentiality and attorney-client privilege  3.68 attorney’s duty of confidentiality  5.67 documents 6.126 conflicts of interest  3.56 contingency fees  3.80 expert witnesses  4.02, 4.14 foreign firms in  1.97 judges 7.42 pre-testimonial communication with witnesses  3.20, 3.45, 3.47, 6.160, 10.27 Frank, Jerome  8.05 Fuller, Lon  7.24–7.25, 7.54–7.56 Functional Thesis  274–7.105 aim of  7.67 Functional Thesis in comparative perspective 7.36–7.65 ethical obligations in comparative perspective 7.58–7.65 role and ethics in civil law ideal type  7.37–7.47 role and ethics in US model  7.48–7.57 Functional Thesis as a prescriptive tool  7.66–7.99 ethics of dissenting opinions, Functional Thesis and 7.92–7.99 international arbitration, Functional Thesis in 7.67–7.85 party-appointed arbitrators, Functional Thesis and 7.86–7.91 theory of professional ethics  7.07–7.65 adjudicators, role of see under adjudicators

377

Index Functional Thesis (cont.): advocates’ role, defining  7.33–7.35 comparative perspective, Functional Thesis in 7.36–7.65 determining professional roles  7.13–7.22 functional roles  7.08–7.09 moral agency  7.07 Garth, Bryant  6.131 Gélinas, Fabien  8.38 Geneva Convention on the Execution of Foreign Arbitral Awards (1927)  1.13, 1.20 Geneva Protocol on Arbitration Clauses (1923)  1.13, 1.20, 1.22 presumption of voluntary compliance with awards 1.19 Germany attorneys  7.44, 7.45 contingency fees  3.82 expert witnesses  4.02, 4.14–4.15, 4.31–4.38 foreign firms in  1.97 judges  7.37, 7.42, 7.63–7.64 pre-testimonial communications with witnesses  7.03 third-party funding  5.08 attorney’s duty of confidentiality  5.67 globalization of the legal profession  1.42–1.53 global geographic diversification  1.49–1.53 tensions created by  1.52–1.53 informal mechanisms inadequate  1.43 rise of mega law firms  1.44–1.48 ‘glocalization’ 1.100 Goldhaber, Michael  10.34–10.35 good faith early arbitration’s belief in  1.19, 1.21 hallmark of lex mercatoria 1.17 implied requirement, as  1.17 Gould, Stephen Jay  4.33–4.34 Greece 6.33 attorneys 7.44–7.45 third-party funders  5.08 Groupthink 8.53–8.56 challenging consensus of group  8.57–8.59 ‘guerrilla tactics’  3.05 meaning 1.08 Hague Principles on Ethical Standards for Counsel  1.74, 3.88 Herodotus  8.01, 8.03, 8.108 Hong Kong  1.99 champerty 5.46 expert witnesses  4.14 Hunter, Martin  8.41, 8.59 Huxley, Professor Andrew  7.56 ICSID 8.24 Convention 6.153 Rules of Procedure for Arbitration Proceedings conflicts of interest  3.61, 3.63 nationality of arbitrators  2.118 immunity of arbitrators  2.02, 2.97–2.100, 9.36–9.43 arguments to limit immunity  9.38 exceptions to immunity  9.39–9.42

forfeited remuneration  9.41–9.42 national immunity rules  9.39–9.40 reasons for immunity  9.37 impartiality arbitrators see impartiality and independence of arbitrators judges  7.43, 7.50–7.51, 7.54–7.56 impartiality and independence of arbitrators  2.16–2.17, 2.102–2.119, 8.01–8.109 affirming independence  2.54 arbitrator challenges see arbitrator challenges bias, proof of  2.105–2.106 content of arbitrators’ impartiality obligations 6.60–6.88 duty to disclose  6.61–6.83 duty to investigate potential conflicts  6.84–6.88 disclosure obligations  2.54, 2.58–2.60, 2.108–2.114, 6.61–6.83 conflicts of interest, internal  2.114 descriptions of information to be disclosed  2.114 duty to investigate potential conflicts of interest  2.55, 2.85, 2.115, 6.84–6.88 failure to disclose  2.111 nature of  2.109 purpose of  2.108 enforcement by disclosure of conflicts of interest 2.54 ‘evident partiality’ test  2.104, 2.106 see also conflicts of interest finality clauses  2.75, 6.93 IBA Evidence Rules, independence obligations under 4.65–4.70 impartiality questions no longer left to discretion of arbitrator 2.49 ‘independence’ vs ‘impartiality’ vs ‘neutrality’ 2.103–2.107 issue conflicts see issue conflicts ‘justifiable doubt’ standard  2.104, 2.107 meaning of independence and impartiality  2.56 myth of ‘non-humanness of judges’  8.05–8.13 national courts’ inconsistent interpretation of impartiality standards  2.75–2.77 nationality and other group affiliations  2.116–2.119 new role and new ethics of investment arbitrators 8.14–8.36 role switching and issue conflict  8.19–8.36 transparency reforms and precedential effect of awards 8.16–8.18 obligation of neutrality on all arbitrators  2.57 party-appointed arbitrators, impartiality of see under party-appointed arbitrators perceptions by outsiders  2.17 requirement of impartiality in selection process 2.38 role switching  8.23–8.29 same duties on all arbitrators  2.16, 2.57, 8.71–8.72 settlements, encouraging  2.128 India Bhopal gas leak, US attorneys’ conduct after 1.55–1.56 foreign lawyers abroad, no jurisdiction over  1.56 LCIA India  1.94, 1.102

378

Index opposition to foreign lawyers in international arbitration  1.60, 1.90, 1.92–1.95, 1.98, 1.100 ‘fly-in–fly-out’ permission  1.93 international arbitration adjudicatory model of arbitration  9.04–9.09 arbitral institutions see arbitral institutions arbitral procedure see arbitral procedure arbitrators see arbitrators authority and legitimacy  9.65 confidential nature of  2.41 contract vision of arbitration  9.10–9.17 costs 2.47 counsel/attorneys see counsel/attorneys culture 7.71–7.72 neutrality between national cultural values  7.73 decentralized and diversified network  1.108, 10.22–10.23 demographics see demographics in global and international arbitration practice early modern arbitration system  1.12–1.23 compromise-oriented  1.14, 1.15, 2.20 foundations 1.13 need for stronger enforcement mechanism  1.20 origins 1.12 procedures/soft-edged standards  1.14–1.18, 2.22 voluntary compliance/enforcement of awards  1.13, 1.14, 1.19, 9.65 economic competition in  1.39–1.42 effective resolutions of disputes  7.74–7.75 ethics see ethics experts see under experts/expert witnesses foundation 1.01–1.02 Functional Thesis in  7.67–7.86 applying the Functional Thesis  7.77–7.85 normative goals of international arbitration 7.71–7.76 future of  10.03–10.09 international arbitrators see arbitrators investment arbitration see investment arbitration jurisdictions seeking to attract international arbitration 1.78–1.87 modern international arbitration  1.24–42 economic competition in  1.39–1.42 formalization and increased transparency 1.35–1.38 growth and diversification of  1.24, 1.28–1.34 ‘judicialization’ of arbitration  1.37 new participants  1.34 size and cultural diversity, growth in  1.28–1.29 offshore litigation, as  1.37 regionalization of  1.102, 2.46 self-regulation see self-regulation third-party funders see third-party funders International Arbitrator Information Project (IAIP) 8.94–8.107 categories of information  8.96 collective action and free-rider problems  8.101 feedback about arbitrators, provision of  8.97–8.100 deterrent effect  8.104 moral hazard, reducing  8.106 nature of  8.99 response to specific questions, as  8.98

IAIP as regulator  8.102 selection process for arbitrators, assisting in  8.104 international arbitrators see arbitrators International Bar Association (IBA) ‘Core Values’ Resolution (1998)  1.70, 3.86 Counsel Conduct in Arbitration, Task Force  1.06 General Principles of the Legal Profession (2011)  1.70, 1.73, 3.86 Guidelines on Conflicts of Interest in International Arbitration  1.38, 2.84–2.87, 7.102, 8.27 arbitrators’ conflicts  5.83, 5.87, 5.92, 5.96–5.97, 5.99, 5.105–5.106, 8.19–8.22, 9.29 categories of information  6.73 chairpersons 7.89 confidentiality obligations of arbitrators  2.126 counsel in same chambers  6.81–6.83 criticized 6.75 disclosure obligations of arbitrators  2.113, 6.73–6.77 drafting of  6.78–6.80 duty to investigate conflicts of interest  6.85 importance/success of  2.86–2.87 meaning of standards of impartiality  2.84 party-appointed arbitrators, pre-appointment communication with  8.78 repeat appointments of arbitrators  5.72, 5.80 Guidelines on Party Representation in International Arbitration, Task Force (2013)  1.75, 3.07, 3.89–3.92, 3.98 counsel ethics  6.159 criticisms of  10.24 development of  6.137–6.140 documents 7.85 party-appointed arbitrators, pre-appointment communication with  8.78 pre-testimonial witness communication  7.84 International Code of Legal Ethics (1956)  1.69, 3.85 arbitrators’ immunity  2.97 Professional Conduct of Counsel in International Arbitration, Task Force  3.07, 3.89 Rules for Taking of Evidence in International Arbitration (1999)  1.35, 2.20, 3.08 pre-testimonial communication with witnesses  6.128, 7.83 Rules for Taking of Evidence in International Commercial Arbitration (2010)  4.49, 6.77, 7.101, 7.103, 9.60 disclosure obligations  4.60–4.64 expert witnesses  4.55–4.56, 4.60–4.69 good faith in taking evidence  6.130 independence obligation  4.65–4.69 pre-testimonial communication with witnesses  3.36–3.37, 3.41, 3.46, 6.128, 7.83 privileged evidence  6.129 Rules of Ethics for International Arbitration (1987)  2.84, 6.76, 6.77, 6.79 disclosure obligations  2.111, 6.76 duty to investigate conflicts of interest  6.85 party-appointed arbitrators, pre-appointment communication with  8.78 settlements 2.128 Statement of Core Principles (2005)  1.70 Task Force/Task Force Guidelines  8.36

379

Index International Centre for Dispute Resolution (ICDR) Arbitration Rules arbitrators’ confidentiality obligations  2.126 arbitrators’ immunity  2.97 independence obligation  4.68 foundation 1.32 International Chamber of Commerce (ICC)  1.32 admission of arbitrators to database  6.103 extra-legal considerations affecting appointment 8.48 challenge decisions no publication of  2.70 procedure for  2.70 reports containing general summaries  6.91 code of ethics not adopted  2.81 experts 4.57 fees of arbitrators, control over  6.98–6.99 ICC Arbitration Rules conduct of arbitrators  2.81 disclosure obligations  2.58–2.60, 2.112, 6.64–6.67, 6.70–6.72 duty to investigate conflicts of interest  6.86 independence and impartiality of arbitrators  2.53, 2.58, 2.103 nationality of arbitrators and chairpersons  2.117, 2.119, 7.90 presumption of voluntary compliance with awards 1.19 reasoned awards  29 publication of reports on decisions  2.71, 6.91 international conventions  2.90–2.91 International Council for Commercial Arbitration  6.131, 8.36 International Court of Justice (ICJ) direct appointment of experts to the tribunal  4.42, 4.86 expert advice from international organizations  4.40, 4.40 experts appearing as counsel  4.41, 4.86 International Criminal Tribunal for the Former Yugoslavia (ICTY)  6.160, 10.17–10.20 codes of conduct  1.107, 1.108 pre-testimonial communications with witnesses  3.40–3.41, 3.43 international criminal tribunals  1.107–1.108 codes of conduct  1.107 International Institute for Conflict Prevention and Resolution 6.113 International Law Association Study Group Hague Principles see Hague Principles on Ethical Standards for Counsel International Mediation Institute  6.109 investment arbitration  2.17 contingent fees  3.83 counsel ethics  6.152–6.153 fact-finding 8.33–8.35 focus on arbitrators and criticisms of  2.21–2.22 increasing number of disputes  2.21 investment treaties  2.22 new role and new ethics of investment arbitrators 8.14–8.36

role switching and issue conflict  8.19–8.36 transparency reforms and precedential effect of awards 8.16–8.18 party-appointed arbitrators  8.40 see also party-appointed arbitrators precedents building up of  6.50 precedential effect of awards  8.16–8.18 soft precedent  8.32 role switching  8.23–8.29 selection of arbitrators nationality of arbitrators  2.118 personal background/experiences of prospective arbitrators 2.38 tribunals of three arbitrators  2.27 third-party funding  5.14, 5.131 ‘Invisible College of International Lawyers’  1.01–1.03, 1.12, 1.19, 1.23 issue conflicts  1.08, 8.30–8.36 disqualification for  2.07, 8.35 fact-finding 8.33–8.35 precedent, arguing against  8.32 Italy arbitrators’ conduct  2.92 confidentiality and attorney-client privilege  3.68 expert witnesses  4.14, 4.31–4.38 judges 7.37 Janis, Irving  8.53, 8.57–8.59, 8.67 Japan contingency fees  3.80 judges 8.34 rules on foreign firms in international arbitration  1.60, 1.81–1.82 judges arbitrators, compared to  7.19, 7.23 civil law judges  7.37–7.47 attorneys’ collaborative role  7.43, 7.44 attorneys’ independence from clients  7.46–7.47 education and selection  7.39 impartiality obligations  7.43 management role  7.42–7.43 ‘official portrait’  7.37–7.38, 7.40 range of methodologies employed  7.40–7.41 extra-legal factors in adjudicatory decision-making  8.45–8.46, 8.50 fact-finding 8.33–8.44 heuristic biases  8.56 judicial authority as public goods  9.65 myth of ‘non-humanness of judges’  8.05–8.13 US model  7.42, 7.48–7.57 attorneys’ active role, and  7.49, 7.52 impartiality  7.50–7.51, 7.54–7.56 law-making and policy-creating functions  7.51, 7.53 neutrality  7.50–7.51, 7.55–7.56 Karton, Joshua  9.14 Kauffman-Kohler, Gabrielle  8.18 Korea rules on foreign legal consultants in international arbitration  1.60, 1.87

380

Index legal profession/practice counsel see counsel/attorneys globalization of see globalization of the legal profession multi-disciplinary practices  5.05 national bar associations see national bar association professional monopoly  1.53 regulation of transnational law practice see transnational law practice regulation self-regulation see self-regulation written codes of ethics, development of  1.46, 1.48 Legal Realist movement  8.08 lex mercatoria  1.17, 1.36, 9.47, 9.50 commercial rules/norms of arbitrations restated as 9.61 liability standards of arbitrators  2.96–2.100 malpractice claims see malpractice claims London Court of International Arbitration (LCIA)  1.32, 7.104, 10.24 Arbitration Rules, revisions to  6.140–6.141, 6.148, 6.163 code of ethics not adopted  2.81 guidelines 3.07 independence and impartiality of arbitrators  2.53 India  1.94, 1.102 publication of abstracts of decisions  2.68–2.69, 2.71 challenge decisions  6.91 Luban, David  7.55, 9.65 MacIntyre, Alasdair  7.07 malpractice claims arbitrators’ immunity from malpractice liability  2.02, 2.97–2.100, 9.36–9.43 professional regulation, as  2.96 marketplace for arbitrator services see selection of arbitrators and marketplace for arbitrator services Menkel-Meadow, Professor Carrie  6.113, 7.18, 7.22 Milan Chamber for National and International Arbitration  2.80, 6.102 national bar associations see also International Bar Association (IBA) arbitrators’ ethical duties, as source of  2.92–2.95 lawyers as products of  3.08 need for harmonized international choice-of-law rules  10.27 regulation arbitrators, regulation of  2.05–2.06, 2.92–2.95, 6.113–6.114 choice-of-law rule needed  6.162 granting exemptions from national rules  6.161 national ethical rules governing conduct in international arbitration  3.43 transnational law practice see under transnational law practice regulation national courts  1.19, 1.30 arbitrators, and challenges to arbitrators or awards  2.63, 2.89, 6.93–6.95 ethical duties of arbitrators, as source of 2.88–2.89

inconsistent interpretation of impartiality standards 2.75–2.77 national courts’ rulings  2.05–2.06 regulating 6.113–6.114 attorneys, regulation of  6.34–6.35, 6.44 bias 7.73 control function  6.56 enforcement 1.19 finality clauses  2.72–2.73, 2.75–2.77, 6.93 raising ethical conflicts in  1.58 third-party funders, and  5.81, 5.132–5.133 uncertainties of transnational adjudication in national courts  6.46–6.49, 6.54 Netherlands coaching witnesses  3.34 expert witnesses  4.02, 4.14, 4.31–4.38 third-party funding  5.08 New York Convention  1.20, 1.46, 2.73–2.74, 6.55, 9.33, 10.34 arbitrators’ obligations  2.90 challenges to awards  2.01 enforcement of arbitration agreements/awards  1.21 public policy  5.53 right to be represented by counsel  1.76 misconduct not addressed  1.21, 1.22, 2.13 New Zealand conflicts of interest  3.60 contingency fees  3.80 North American Free Trade Agreement (NAFTA)  3.96, 8.24 oaths and perjury deterrent effect of oaths  4.73, 4.98 expert witnesses justification and belief  4.76–4.80 proposals for expert witness ‘oaths’  4.71–4.81 structural reforms for reshaping expert witness roles 4.98–4.103 testimony as opinion not fact  4.74–4.75 traditional oaths and certification for experts 4.94–4.97 perjury 4.72–4.81 purposes of oaths  4.95–4.97 Panama Convention  6.55 Park, William ‘Rusty’  2.24, 8.22, 8.23 Parker, Christine  6.14 party-appointed arbitrators affirmative case for party-appointed arbitrators 8.51–8.69 challenging consensus  8.57–8.58 Groupthink 8.53–8.56 party-appointed arbitrators and dissenting opinions 8.62–8.69 party-appointed devil’s advocates  8.57–8.61 chairpersons  7.88–7.90, 8.82 clash over parties’ communications with  1.31 criticisms of  8.40–8.43, 8.70 moral hazard  8.42, 8.104–8.105 devil’s advocates, party-appointed  8.57–8.61, 8.81 importance of  8.61 party-appointed arbitrators, and  8.66–8.67

381

Index party-appointed arbitrators (cont.): reducing prevalence of Groupthink  8.57–8.58 style 8.58–8.60 dissenting opinions  7.92–7.99, 8.60–8.69 concerns about  8.42, 8.62–8.65 restraint over  8.75 Functional Thesis, and  7.86–7.91 impartiality of  7.90, 8.37–8.76 see also impartiality and independence of arbitrators distinctions in nature of obligations  8.73–8.76 same duties on all arbitrators  2.16, 2.57, 8.71–8.72 nationality 7.90 nature of  1.08, 2.07 overly partisan arbitrators  8.59, 8.68–8.69 popularity of  8.37 role 7.86–7.88 selection of  2.31, 2.34 interviews pre-appointment  7.89, 8.74, 8.78 nationality 7.90 partisan appointments  1.31, 8.38–8.39 selection process, reforming and refining  8.77–8.107 information asymmetries  8.84–8.93 market-based solution to a market problem 8.94–8.107 see also International Arbitrator Information Project (IAIP) procedural asymmetries  8.78–8.83 Paulsson, Jan  1.41, 8.42, 8.43, 8.47, 8.54, 8.68, 8.70, 8.104, 8.105 perjury see oaths and perjury Portugal confidentiality and attorney-client privilege  3.68 contingency fees  3.80 third-party funding  5.08 precedents arguing against  8.32 building up of  6.50, 9.55–9.56 precedential effect of awards  8.16–8.18, 9.57–9.58 guiding future parties and tribunals  9.63 soft precedent  8.32 stare decisis  8.31, 9.56 transparency 9.62 pre-testimonial communication with witnesses see under witnesses pre-trial discovery see under disclosure obligations procedures, arbitral see arbitral procedures professional ethics see under Functional Thesis public goods and club goods  9.54–9.67 arbitrations generating procedural rules and practices 9.55–9.58 club goods  9.64–9.67 authority and legitimacy of international arbitration 9.65 production of highly skilled arbitrators  9.66 development of substantive commercial rules  9.59 precedents see precedents resource for rule and law-making  9.60–9.61 Randall, John  7.54 Rau, Alan  9.01, 9.16 regulation

meaning of ‘regulation’  6.12–6.30 regulation of transnational law practice see transnational law practice regulation self-regulation see self-regulation Reinsurance and Insurance Arbitration Society  2.83 Reisman, Professor Michael  3.06 Rutledge, Peter ‘Bo’  9.38 Saint-Exupéry, Antoine de  6.01, 6.05 Schachter, Oscar  1.01–1.02, 1.12, 1.19, 1.23 selection of arbitrators and marketplace for arbitrator services 2.11–2.48 challenges see arbitrator challenges disclosure obligations see under independence and impartiality of arbitrators field in which international arbitrators operate 2.18–2.23 adoption of more technocratic and procedurally rigorous approach  2.19–2.20 assessing quality of arbitral decisions  2.20 investment arbitration  2.21–2.22 need to set internationally neutral procedures 2.20 inequities and lack of transparency in  1.08 imperfections in market for international arbitrators  2.40–2.48, 8.93 difficulty of assessing new arbitrators  2.44 field dominated by elite group of insiders  2.40 information asymmetries  2.41–2.47, 8.84–8.93 information from direct participation  2.43 negative consequences of information asymmetries 2.47 ‘outsider’s revenge’  2.46–2.47 prior service as pre-eminent qualification  2.44 procedural asymmetries  8.78–8.83 market-based solution to a market problem  8.94– 8.107 see also International Arbitrator Information Project (IAIP) party-appointed arbitrators, selection of see under party-appointed arbitrators pool of international arbitrators  2.12–2.17 arrival of new arbitrators, disruptive practices from 2.15–2.17 dominated by men from Europe and North America 2.14 sense of duty historically  2.13 talent and experience of arbitrators  2.12 selection process arbitral chairperson, selection of  2.32, 2.34 forum shopping, as  2.25, 8.41 disagreements about appointment process  2.34 importance of  2.23, 2.39 information about prospective arbitrators gathered 2.30–2.31 institutions’ refusal to appoint  2.78 intentionality in selection  8.49–8.50 interviews of prospective arbitrators  2.31, 2.33, 2.34 lists of potential candidates  2.29 parties shaping composition of tribunals  2.28 party-appointed arbitrators see under party-appointed arbitrators

382

Index proper conduct during selection process, disagreement about  2.33–2.34 reputation and personal qualities  2.36 reputation regarding particular sub-issues 2.35–2.37 strategic considerations in selecting an arbitrator 2.35–2.39 third-party funding, effect of  5.12 tri-partite tribunals, popularity of  2.27–2.28 procedures for arbitrator selection  2.27–2.34 self-regulation  1.10, 5.109, 6.01–6.170 arbitrator regulation as model of professional self-regulation  1.10, 2.08, 6.58–6.116 arbitrators’ impartiality obligations  6.60–6.88 enforcement 6.89–6.111 national alternatives  6.112–6.116 counsel in international arbitration, self-regulation of  1.53, 6.31–6.33, 6.117–6.165 developing enforcement mechanism  6.143–6.165 developing substantive standards  6.137–6.142 formal tribunal powers  6.147–6.158 fully operational self-regulation of counsel 6.159–6.165 national vs international regulation of attorneys 6.120–6.127 opposition to regulation  6.117–6.118 precursors to ethical regulation  6.128–6.136 defining self-regulation  6.10–6.43 declining roles of formalized state action 6.16–6.20 enforced self-regulation  6.21–6.24, 6.28, 6.55 legitimacy of power exercised by private entities 6.25–6.28 meaning of ‘regulation’  6.12–6.30 derided 6.02 enforcement 6.89–6.111 arbitrator certification or licensure  6.108–6.111 control over compensation and ad hoc regulatory functions 6.97–6.107 enforcement mechanisms, developing 6.143–6.165 formal tribunal powers  6.147–6.158 fully operational self-regulation of counsel 6.159–6.165 selection and challenge procedures  6.90–6.96 extension to all participants  1.10 future of ethical self-regulation  10.29–10.35 impartiality obligations of arbitrators  6.60–6.88 duty to disclose  6.61–6.83 duty to investigate potential conflicts of interest 6.84–6.88 international arbitration, self-regulation in 6.44–6.165 arbitration evolving into global governance mechanism 6.52–6.54 arbitrator regulation as model of professional self-regulation 6.58–6.116 awards voluntarily complied with  6.56, 9.65 exchanges of information  6.51–6.52 international arbitration as self-regulatory regime 6.45–6.57 national courts’ control function  6.56

precedents, building up of  6.50 States’ control function  6.55 uncertainties of transnational adjudication in national courts  6.46–6.49, 6.54 professionalism and self-regulation  6.31–6.43 attorney regulation  6.31–6.43 attorney self-regulation  6.31–6.33 court regulation of attorneys  6.34–6.35 Shephard, John  4.13 Singapore champerty  5.47, 5.51 foreign firms in international arbitration/‘fly-in– fly-out rule’  1.79–1.80, 1.88 third-party funding  5.08 Society of Maritime Arbitrators  2.83 Solicitors Regulation Authority (SRA) choice-of-law rules  10.27 Code on overseas practice  3.28 South Africa contingency fees  3.82 third-party funding  5.39 standards and rules  1.24 ambiguities 1.09 arbitrators challenge standards  1.38, 2.31, 2.67 disqualification 2.109 impartiality standards  2.84 liability standards  2.96–2.100 ethical duties of see ethical duties of arbitrators clarity and transparency  1.08 conflicts of interest 3.55–3.61 see also conflicts of interest counsel see counsel/attorneys enforcing 1.98 experts see experts/expert witnesses status of international arbitrators  9.01–9.69 arbitrator immunity  9.36–9.43 see also immunity of arbitrators competing models of international arbitration 9.03–9.17 adjudicatory model of arbitration  9.04–9.09 contract vision of arbitration  9.10–9.17 decision-making autonomy  9.44–9.53 duality of arbitrators’ status  9.19–9.23 limitations on contracting for adjudication 9.25–9.35 public goods, club goods, private arbitrators see public goods and club goods Stevens, Margrete  6.131, 6.140 Stockholm Chamber of Commerce Arbitration Rules arbitrators’ confidentiality obligations  2.126 publication of summary reports of decisions  2.71 challenge decisions  6.91 Strong, Stacie  6.17 Switzerland pre-testimonial communications with witnesses  3.42–3.43, 3.45, 3.47, 6.160, 10.27 professional secrecy  5.67 Swiss Law on Private International Law  2.103 third-party funding  5.08

383

Index Thailand prohibitions on foreign lawyers in international arbitration  1.88, 1.90, 1.95 third-party funders  5.01–5.141 ambiguities about participation in arbitral processes 2.49 courts, and  5.81, 5.132–5.133 definitions 5.20–5.26 demand for dispute funding  5.07 expansion of  5.04, 5.08–5.09 funders and arbitrators  5.71–5.108 analysing potential funder-arbitrator conflicts 5.83–5.85 bias allegations  5.78 funders as outside investors  5.86–5.108 later discovery of funding agreement  5.75–5.77 potential conflicts and inadequacy of current rules 5.72–5.82 purposeful analysis of conflicts  5.104–5.108 repeat appointments  5.72, 5.80 funders and counsel  5.57–5.70 attorney-client confidences  5.65–5.68 fee-splitting 5.63–5.64 independence 5.58–5.62 international arbitration, funders and attorneys in 5.69–5.70 funders and parties  5.37–5.56 national law limitations on funding agreements 5.38–5.42 national limitations in international arbitration 5.43–5.56 international arbitration attractive to third-party funders, as  5.10–5.11 effects on  5.11–5.16 funders and attorneys in  5.69–5.70 funders and other participants in  5.36–5.108 regulation of third-party funding  5.109–5.134 liberalization of legal services trade  5.04–5.06 maintenance, champerty and barratry international arbitrations, in  5.44–5.54 national law limitations  5.38–5.42 mechanics 5.27–5.35 outside investors, funders as  5.86–5.103 concentration effort  5.88–5.96 corporate governance constraints  5.97–5.99 implications of intentionality  5.100–5.103 professional conduct  1.09 dispassionate assessment of claims  5.27 non-attorney status  5.31–5.34 participation in arbitration less inherently constrained 1.26 ‘signalling’ effect of funded cases  5.125 ‘super-lawyering’ assessment of cases  5.27–5.32 regulation of third-party funding in international arbitration 5.109–5.134 challenges in regulating third-party funders in international arbitration  5.122–5.134 regulation of funders by funders/ALF Code 5.111–5.121 types of funders  5.18 Trachtman, Joel  9.54, 9.64 transnational law practice regulation  1.54–1.72

absence of rules regarding practice  1.72 international codes of ethics, limitations of 1.69–1.71 efforts at international regulation of transnational legal practice  1.69–1.72 ethical regulation remaining largely local  1.54, 1.58 international regulation of transnational legal practice, efforts at  1.69–1.72 national bar authorities petitioned for disciplinary action 1.57 national regulation of transnational legal practice 1.59–1.68 cross-border practice in EU  1.59 extraterritorial regulation by bar associations, issues facing  1.65–1.68, 1.77 foreign attorneys practising subject to local regulation 1.59 horizontal and vertical constraints on bar authorities 1.65–1.65 limited concern over foreign conduct of locally licensed attorneys  1.61–1.62 local bar associations/societies as primary enforcers of ethics  1.64 resistance to opening up legal markets in some holdouts 1.60 territoriality as basis for regulation  1.63–1.64 raising ethical conflicts in national courts  1.58 transparency challenging arbitrators  1.38, 6.93, 6.96, 6.106 publication  2.68–2.69, 6.91–6.92, 6.107, 9.62 disclosure and challenge standards, increasing transparency of  1.38 increased  1.35, 1.37, 2.41, 2.49 reliance on precedent  9.62 increased attention on details of procedure and outcomes 2.20 investment arbitration transparency reforms 8.16–8.18 Union Internationale des Avocats  1.70, 3.86 United Kingdom arbitration arbitrators’ duty to disclose  6.62 counsel and arbitrator from the same chambers  2.17, 6.82 immunity of arbitrators  9.39 misconduct as grounds to refuse enforcement of awards 1.22 pre-testimonial communication with witnesses 3.47 right to be represented by counsel  1.76 UK/US firms dominating arbitration practice  1.96, 1.101 confidentiality and attorney-client privilege  3.68, 3.69 conflicts of interest  3.59 contingency fees  3.82 disclosure of confidential documents, inadvertent 3.51 expert witnesses  4.05, 4.26–4.30 oaths 4.71

384

Index legal profession Bar, social traditions of  1.45 British Solicitors’ Practice Rules  1.45 law firm growth  1.47 Solicitors Regulation Authority see Solicitors Regulation Authority (SRA) maintenance and champerty  5.39, 5.45 multi-disciplinary practices  5.05 self-regulation 6.33 third-party funding  5.08 attorney-client privilege  5.66 United Nations  1.12 United Nations Commission on International Trade Law (UNCITRAL) Rules  2.54, 8.25 Model Law arbitrators’ independence and impartiality 2.103–2.104 disclosure obligations  2.110 conducting arbitration in accordance with arbitration agreement  2.122 Principles of International Commercial Contracts 9.61 Transparency Rules  8.16 United Nations Convention on the Law of the Sea (UNCLOS) direct appointment of experts to tribunals  4.42–4.43 United Nations Convention on the Recognition and Enforcement of Arbitral Awards see New York Convention United States American Arbitration Association see American Arbitration Association (AAA) arbitration contract vision of  9.10–9.11 deference to  6.148 disqualifying counsel  6.149–6.150 ‘evident partiality’ test  2.104, 2.106 ex parte communications  3.70–3.72, 4.68, 7.43, 8.39 immunity of arbitrators  9.39–9.40 misconduct giving rise to challenge to awards  1.22 national courts and bar associations, regulation by 6.113 party-appointed arbitrators  8.38 permitting foreign counsel to appear  1.82–1.86 pre-testimonial communication with witnesses  1.30, 3.33, 3.35, 6.126, 7.03 sanctioning attorneys for misconduct  6.146 US/UK firms dominating arbitration practice  1.96, 1.101 attorneys advertising 5.139 approach to party-appointed arbitrator  1.31 attorneys’ professional conduct  1.30 confidentiality/attorney-client privilege  3.64, 3.66, 3.68, 3.69 conflicts of interest  7.60 ethical regulation  6.39–6.43 judges, and  7.49, 7.52, 7.60, 7.63 regulation by courts  6.34–6.35, 6.44 role of  7.49, 7.52, 7.60, 7.64 self-regulation  6.33, 6.35

tribunal’s rules, bound by  1.73 zealousness  3.75, 3.77–3.78, 7.62 bar associations  1.45 American Bar Association see American Bar Association (ABA) competition among state bars blocking national regulation 1.64 disciplinary jurisdiction not applying abroad  1.56 horizontal and vertical constraints on  1.64–1.65 misconduct by US attorneys in foreign countries 1.55–1.57 champerty  5.40–5.42, 5.47, 5.53 conflicts of interest  3.55, 3.57, 3.59, 3.60, 3.62 contingency fees  3.80 disclosure of documents  3.49 inadvertent disclosure of confidential documents 3.51 ex parte communications  3.70–3.72, 4.68, 7.43, 8.39 expert witnesses  4.02, 4.09–4.14, 4.18–4.25 judges  7.42, 7.48–7.57 attorneys’ active role, and  7.49, 7.52, 7.60, 7.63 impartiality  7.50–7.51, 7.54–7.56 law-making and policy-creating functions  7.51, 7.53 neutrality  7.50–7.51, 7.55–7.56 judicial opinions, public nature of  2.42 legal markets effects of US firms on local markets  1.97–1.100 foreign lawyers allowed greater access to US legal markets 1.60 globalization of law firms  1.49–1.51 law firm growth  1.47 staffing and qualifications in US overseas offices 1.99–1.100 Legal Realist movement  8.08 Model Rules for Lawyers Acting as Third-Party Neutrals  2.93, 6.113 Model Rules of Professional Conduct  6.113 creativity 3.75 ethical conflicts of counsel  3.25 international tribunals having own rules  6.160 private enforcement through litigation  6.46 public proceedings  7.20 third-party funding  5.08, 5.77 attorney-client privilege  5.66 disclosure of ownership interests  5.101–5.102 witnesses cross-examination 3.75 Daubert standard for admissibility of scientific testimony 4.81 expert witnesses  4.02, 4.09–4.14, 4.18–4.25 pre-testimonial communication with  1.30, 3.33, 3.35 Vagts, Detlev  1.43, 3.22 van der Berg, Albert  7.92–7.94, 8.42, 8.43, 8.54, 8.61–8.64, 8.68, 8.70, 8.74 Van Harten, Gus  8.43, 8.48 Vienna Convention on the Law of Treaties  2.21 Wendell Holmes, Justice Oliver  8.02 Wilkins, Professor David  1.47, 2.96, 6.39–6.43, 6.93

385

Index witnesses cross-examination 3.02–3.03 vigorous 3.75 expert witnesses see experts/expert witnesses pre-testimonial communication with witnesses  3.21, 3.32–3.38, 3.48, 7.82–7.85 acceptable in international arbitration  3.04 choice-of-law 3.39–3.47 civil law countries  1.30, 3.33, 3.34, 3.38, 3.45 coaching witnesses  3.33, 3.34 divergence of opinions/elusive international consensus 3.36–3.38 ethical obligations in comparative perspective 7.58

exemptions from local ethical rules in international proceedings 3.42–3.45 Functional Thesis, and  7.82–7.85 subterranean conflicts  3.34–3.36 Wolfram, Charles  1.45 World Intellectual Property Organisation (WIPO)  1.32 World Trade Organisation  1.51 General Agreement on Trade in Services (GATS) 5.04 panels seeking expert advice from international organizations 4.40 two-phase procedure for assimilating expert evidence 4.44–4.45 Zakaria, Fareed  10.03

386