Nani Palkhivala Arbitration Centre Annual International Conference Independence & Impartiality in Arbitration 15 March 2014

Independent Expert Expert Witness Appointment by the Arbitral Tribunal: Section 26 of Indian Arbitration Act, 1996, provides for the appointment of Expert by the arbitral tribunal to provide expert witness report on certain specific and contentious issues, which need to be determined by the arbitral tribunal. Appointment of third party independent Expert by the arbitral tribunal depends upon organization capabilities and also the past record in terms of number of expert reports provided by the organization. IBA rules of evidence apply to both party appointed as well as tribunal appointed expert on the other hand CIArb applies only to party appointed expert. IBA rules provide that the Expert Report shall provide a statement about the past relationship with any of the parties, their legal advisors and the tribunal, and a description of his or her background/qualification, training and experience. In case of party appointed expert and pursuant to CIArb protocol a declaration need to be provided that the expert opinion is an objective and an unbiased opinion which has not been influenced by pressure of dispute resolution process or by any party to arbitration. Expert Witness Due to increasing sophistication and complexity of matters referred to arbitration the need of experts’ report is gaining importance and becoming industry norm before arbitral award is passed by the arbitral tribunal. Expert’s report are seen as an independent, professional and unbiased. It helps in ascertaining amount in dispute and/or determining the technicalities of a dispute on which the arbitral award is generally based. Experts may be appointed by the parties themselves or by the arbitral tribunal to report to it on specific technical and complex issues that need to be determined by the arbitral tribunal. An expert witness report provides concrete supporting evidence with regard to issues in arbitral proceedings. It helps an arbitral tribunal deliver an arbitral award in all fairness. Independence and impartiality in Arbitration

Some Practical Areas Where Independence / Impartiality is Compromised Qualifications and Experience Past Relationship / Engagements Disclosures Independence challenged after the submissions and report was ignored Terms of Reference Procedures laid down by the Management Review of the claim prepared by the Management rather independent assessment Fees arrangement Success based/ milestone based - questionable Methodology followed Shoddy work, assumptions flowed, biased towards the party, analysis based on management representations, no real balanced view, no empirical evidence produced Submission of the report to the Management before submitting to the Tribunal Emerging trends in arbitration in India

Disclosure norms - legislative scenario in India Section 12 of the Act imposes a legal obligation on a person, who is approached for possible appointment as an arbitrator, to make disclosures (in writing) without any delay of circumstances that are likely to give rise to justifiable doubts as to his or her independence or impartiality. Duty to disclose all such details permeates the entire arbitral process. Lacunae : Section 12 does not specify or lay down the exact nature of disclosures that need to be made. Neither does it specify any format or set of disclosures. In Alcove Industries Ltd. v. Oriental Structural Engineers Ltd. 2008 (1) Arb.LR 393 (Del), the Delhi High Court laid down the legal implications of Section 12 of the Act. This states and clarifies the legal position that an arbitrator may be disqualified from becoming or remaining an arbitrator in a given dispute, not due to the existence of an actual bias, but because of the existence of such facts and circumstances that are "likely to give rise to justifiable doubts about his or her independence and impartiality". Source: 2008 (1) Arb LR 393 (Del) In Murlidhar Rongta v. Jagannath Tibrewala 2005 (1) ArbLR103(Bom), the Bombay High Court set aside the award on the grounds that the duty to disclose was mandatory and an essential procedural safe guard that had to be followed, and since the procedural duty was not adhered to, the award deserved to be set aside. In the Loot (Pvt.) India Ltd. v Reliance Capital Ltd. Arbitration Petition No. 1178 of 2012, before the Bombay High Court, the Court emphasized the need for disclosure of facts and circumstances affecting the impartiality and independence of a unilaterally appointed arbitrator in an adhoc arbitration. In the prominent case of Shakti Bhog Foods Ltd. vs Kola Shipping Ltd. and another on 21 August 2012, the Delhi High Court set aside the impugned award passed by the arbitrator due to his non-disclosure at the time of acceptance of his appointment that he had acted as co-arbitrator for the respondent in a related dispute between the respondent and another party involved in the same transaction. Independence and impartiality in Arbitration

Disclosure norms – best practices as followed by Institutions Statement of independence: In line with IBA/SIAC/ICC/LCIA rules, persons approached in connection with their likely appointment should not hold back vital and material information with regard to their independence and impartiality. For the purpose of conflict check every prospective arbitrator should file statement of independence both in Adhoc as well as Institutional Arbitration. The IBA Guidelines on Conflicts of Interest in International Arbitration have colour- coded lists of specific situations, which, depending on the degree of conflict, do or do not warrant disclosures to be made by arbitrators. Red List: Includes situations that show case examples of the overriding principle that no person can be his or her own judge. It’s a non-exhaustive list and enumerates specific situations, which are bifurcated into non-waivable and waivable list. (e.g. Arbitrator being the legal representative of an entity in arbitration / arbitrator having financial interest in the outcome of the case.) Orange List: Includes circumstances where an arbitrator had provided services for one of the parties in the past. The situation can be considered waivable if parties were aware of conflict of interest and appropriate disclosures were made. (e.g. Arbitrator having previous or current services for one of the parties / Relationship between arbitrator and party and others involved in the case.) Green List: Includes a non-exhaustive record of specific situations where no actual conflict of interest exists. An arbitrator is not duty bound to disclose situation included in the Green list. (e.g. Previously expressed legal opinion / Previous or current services for one of the parties.) Independence and impartiality in Arbitration

Good Practices to strengthen independence in Indian Arbitration The whole arbitration process become futile if the award passed by the arbitrator is biased. Expert report plays a vital role when an arbitral tribunal conclude a point of dispute, pursuant to ClArb protocol payment by the appointing Party of expert’s fees for providing evidence shall not, of itself, vitiate the expert’s impartiality. Following are some of the diligence practices which should be followed in arbitration proceedings: Back ground checks Disclosure Reports Pre appointment meetings To maintain independence in arbitration proceedings background checks by professional independent third party are extremely crucial specially in adhoc arbitration. The practice includes thorough scrutiny of profiles of arbitrators through counsels and also through desktop searches. Although there is a pressing need, especially in ad-hoc arbitration, to conduct a background check prior to appointment of an arbitrator by a professional body, no regulatory frame work has been implemented for this purpose. It is a report which lists previous awards rendered by arbitrators as well as current matters which they are adjudicating upon. Disclosure reports provide parties an opportunity to review the past history of the arbitrators. While the Indian law has no provisions relating to disclosure reports, implementation of such provisions would keep a check on independence and impartiality of arbitrators. In foreign arbitration pre appointment meeting by the disputing parties with the prospective arbitrators is a common phenomenon. It’s a new concept in the Indian arbitration scenario and is gradually gaining momentum. Independence and impartiality in Arbitration

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