1. Independence and Impartiality in Arbitration
Nani Palkhivala Arbitration Centre Annual International Conference
Independence and Impartiality in Arbitration
Michael Hwang SC
15 March 2014

2. International Rules
ICC Rules 2012, Art 11(2) (see ICC Rules 1998, Art 7(2)
11(1) General Provisions
Every arbitrator must be and remain impartial and independent of the parties involved in the arbitration.
11(2) Before appointment or confirmation, a prospective arbitrator shall sign a statement of acceptance, availability, impartiality and independence. The prospective arbitrator shall 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. The Secretariat shall provide such information to the parties in writing and fix a time limit for any comments from them.
1. Impartiality of recent vintage
Notably, the 2012 Rules differ from the 1998 Rules with the inclusion of the words “acceptance, availability, impartiality and” before “independence”. The 1998 Rules did not refer to “impartiality”, even though the Court has always considered challenges based on a lack of impartiality and independence alike: Fry et al., The Secretariat’s Guide to ICC Arbitration (ICC, 2012) (“Secretariat’s Guide”), para
In practice, a prospective ICC arbitrator should make all disclosures and declarations required by Art 11(2) in a single document called the “statement of acceptance, availability, impartiality and independence” (“Statement”).
2. Uncertainty as to what must be disclosed
Notably, the Rules do not provide any guidance on the application of the concepts of independence and impartiality: Secretariat’s Guide, para This has been criticised as a source of confusion and controversy: Craig, Park and Paulsson, ICC Arbitration , 3rd Ed., write at p 210 that the definition of “‘independence’ remains elusive”. The Secretariat’s Guide states that “[s]econdary sources such as the IBA Guidelines on Conflicts of Interest in International Arbitration provide further inspiration”, but that “by their very nature, guidelines risk being incompatible with the Court’s flexible approach… the Green List of the IBA Guidelines may conflict with the subjective criterion expressed in Article 11(2)”.
3. Subjective standard at odds with most international arbitration rules
The relevant vantage point from which the facts which may call into question the arbitrator’s independence are to be assessed is “in the eyes of the parties”. This subjective standard “contrasts with objective standards adopted in many other arbitration rules… The variability and flexibility created by the subjectivity of the standard may in some situations prompt arbitrators to be more forthcoming and in other situations prevent the trivial and unnecessary disclosure that can result from very detailed guidelines”: Secretariat’s Guide, para The latter fear may be compared with the UK Departmental Advisory Committee’s (DAC) fear that including a separate requirement of “independence” in the English Act (apart from “impartiality”) would “give rise to endless argument… where almost any connection (however remote) has been put forward to challenge the independence of an arbitrator”: Williams & Kawharu on Arbitration, p 145.

3. International Rules
UNCITRAL Rules, Art 11 (see UNCITRAL Rules 1976, Art 9)
Article 11 Challenge of Arbitrators
When a person is approached in connection with his or her possible appointment as an arbitrator, he or she shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence. An arbitrator, from the time of his or her appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties [and the other arbitrators]* unless they have already been informed by him or her of these circumstances.
*not found in the 1976 Rules

4. International Rules UNCITRAL Model Law, Art 12(1)-(2)
12(1)-(2) Grounds for challenge
(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him.
(2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.

5. International Rules
LCIA Rules 1998, Art 5(2) (note draft LCIA Rules 2014)
5(2) Formation of the Arbitral Tribunal
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. No arbitrator, whether before or after appointment, shall advise any party on the merits or outcome of the dispute.
5(3) Before appointment by the LCIA Court… he shall sign a declaration to the effect that there are no circumstances known to him likely to give rise to any justified doubts as to his impartiality or independence.

6. Comparison of International Rules
ICC RULES
UNCITRAL RULES
MODEL LAW
LCIA RULES
What must be disclosed?
Facts or circumstances
Circumstances
that could give rise to
likely to give rise to
reasonable doubts as to
justifiable doubts as to
justified doubts as to
the arbitrator’s impartiality
his or her impartiality or independence
his impartiality or independence
Call into question
the arbitrator’s independence in the eyes of the parties
1. Different disclosure standard between independence and impartiality under ICC Rules
The Secretariat’s Guide explains the difference as follows: “Impartiality, unlike independence, inherently contains a subjective element (i.e., the arbitrator’s state of mind). Therefore, the broad subjective standard used for independence did not seem appropriate. The consequences of using an objective standard is that any arbitrator with actual doubts as to his or her impartiality should of course decline to serve”: para
2. Complete disclosure required under ICC Rules
The wider phrasing of what must be disclosed (“facts or circumstances”) and the lower threshold of likelihood (“could give rise to” as opposed to “likely to give rise to”) tend toward “complete disclosure”. The Secretariat’s Guide explains that this insistence arises from the international character of ICC arbitration, and allows parties to make an informed decision at the outset whether or not to object to the arbitrator’s confirmation: para to The first point is pertinent especially given the inclination of some local courts to impute to the “fair-minded and informed observer”, when assessing actual or apparent bias, special knowledge (for instance, special knowledge of the close professional and social links between Bar and Bench in common law jurisdictions: see for instance:-
Taylor and another v Lawrence and another [2002] 2 All ER 353, where the English Court of Appeal held that the informed observer could be expected to be aware of the legal traditions and culture of the English jurisdiction, and accordingly he would be aware that in the ordinary way contacts between the judiciary and the legal profession should not be regarded as giving rise to a possibility of bias. On the contrary, they promoted an atmosphere that was totally inimical to the existence of bias, and what was true of social relationships was equally true of normal professional relationships between a judge and the lawyers he might instruct in a private capacity; or
Laker Airways Inc v FLS Aerospace Limited [1999] 2 Lloyd's Rep 45, where Rix J stated that although barristers in the UK may work from the same chambers and therefore share the same resources, they are essentially self-employed and work independently of one and other, a fact he described as “one of the peculiarities of English law”. He stated that a reasonable Englishman would know this and would therefore not suspect bias).
The main practical consequence of incomplete disclosure in the context of an ICC arbitration is that the ICC Court will treat such omissions with considerable suspicion and tends to lower the threshold that determines whether or not the challenge is accepted: Secretariat’s Guide, para Further, undisclosed information may be relied on at any stage by any party who obtains such information; in contrast, parties only have thirty days upon disclosure of information to challenge the arbitrator’s appointment based on that information: Art 14 ICC Rules.

7. Interpretation of Model Law
Standard of “justifiable doubts” and the test for bias:
Williams & Kawharu on Arbitration explain that “justifiable doubts” for Art 12(2) [Model Law] purposes will arise if the general test for apparent bias is met. This test has undergone refinement… moving from the “real danger of bias” test [in Gough] to [the Porter v Magill test].
The New Zealand Court of Appeal has held in Riverside Casino Ltd v Moxon [2001] 2 NZLR 78 that “whether the matter is approached by reference to what level of predisposition is unfair or impermissible in the circumstances or by reference to the conduct that in the circumstances is to be regarded as establishing bias, each inevitably leads to the same result”.

8. Interpretation of Model Law
Standard of “justifiable doubts” and the test for bias:
The test for justifiable doubts under the Model Law is “identical to the common law test applicable to judges… whether, on the basis of the circumstances invoked by the party bringing the challenge – including the relevant legal traditions and cultures – there exists a real possibility that the arbitral tribunal was biased… [from] the viewpoint of the hypothetical fair-minded and informed observer”: Jung Science Information Technology Co. Ltd. v. Zte. Corporation [2008] HKCFI 606 (HK Court of First Instance)
Common law jurisdictions tend to apply the common law tests for bias.

9. Interpretation of Model Law
Standard of “justifiable doubts” and the test for bias:
Doubts are justifiable if a reasonable and informed third party would reach the conclusion that there was a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision: General Standard 1, paragraph 2(c), IBA Guidelines on Conflicts of Interest in International Arbitration
This is the only guideline in international arbitration which sets out a test for “justifiable doubts”.
1. Status of the IBA Guidelines on Conflicts of Interest in International Arbitration
While the IBA Guidelines provide a test of which doubts are “justifiable”, it should be noted that national courts, in particular the English courts, will not accord any weight to the Guidelines if the common law test for actual or apparent bias is not met. Two cases are illustrative of this approach.
In ASM Shipping Ltd v TMMI Ltd of England (2005) (“ASM”), unreported, the arbitrator, a Queen’s Counsel (“QC”), had previously been instructed by the respondent charterers’ solicitors in an arbitration between different parties but with the same principal witness.
In the prior arbitration, the party for whom the arbitrator had been acting as counsel had made serious allegations against the witness. The appellant owners argued that this would have affected the arbitrator’s ability to act impartially and applied for the arbitral award made by him to be set aside as a result.
Morison J concluded that, in his view, “the independent observer would share the feeling of discomfort expressed by [the principal witness] and would have concluded that there was a real possibility that the tribunal was biased” as a result of the arbitrator having previously acted as counsel against the appellant’s main witness.
The test in Porter was satisfied (although on the facts, Morison J then held that the owners, by taking up the award without then objecting to the arbitrator, had lost their right to object to the irregularity).
Morison J also explained, obiter, his rejection of the respondent’s argument that there could not have been a conflict of interest because the facts alleged did not fall within the IBA Guidelines’ Red List by stating that the issue in question was not “whether [the facts] fell within the Red List or not”, but whether the test in Porter was satisfied. The IBA Guidelines were to be “applied with robust common sense and without pedantic and unduly formulaic interpretation”.
The approach of Morison J in ASM toward the IBA Guidelines was confirmed in the case of A & Ors v B and Another [2011] EWHC 2345 (“A v B”).
The appellant in A v B applied to have the arbitrator removed and his award set aside on the ground that, shortly before completing and issuing the award, the arbitrator had disclosed that he had been instructed as counsel for the respondent’s solicitors in an ongoing matter (which was wholly unconnected with the arbitration).
The application was ultimately refused on the basis that the fair-minded and informed observer would not consider that there was a real possibility of bias merely because an arbitrator had acted as counsel for one of the parties in the past.
In making his decision, Flaux J referred to the test set out in Porter and, just like Morison J in ASM, was quick to dismiss submissions which were made in reliance on the IBA Guidelines as opposed to established English case law.
Flaux J pointed out that the Introduction to the IBA Guidelines “makes it clear that the [IBA] Guidelines are not intended to override national law”. Accordingly, he explained that if there was no apparent bias once the common law test (i.e., the Porter Test) for bias had been applied, nothing in the IBA Guidelines could alter that conclusion.
Accordingly, the IBA Guidelines may, before English Courts, only be used to complement but not contradict English law. Late disclosure by the arbitrator was also not a ‘serious irregularity’ within the meaning of section 68 of the Arbitration Act 1996.
Given that the English courts have such a well-established body of case law (discussed above at [1]-[7]) to refer to in relation to the issue of apparent bias and given that they are bound by the Porter Test, it is unsurprising that the IBA Guidelines have not played a central role in English decisions.

10. Interpretation of Model Law
How do tests for bias relate to the UNCITRAL Model Law?
The UNCITRAL Secretariat has suggested that Art 12 of the Model Law be interpreted to cover biased or partial behaviour during the arbitral proceedings: Seventh Secretariat Note, A/CN.9/26: Howard M. Holtzmann, Joseph E. Neuhaus, A Guide to the Uncitral Model Law on International Commercial Arbitration: Legislative History and Commentary (Kluwer Law International, 1995), p 389 n 5.

11. Tests for bias in common law jurisdictions
The English approach (Part 1)
In R v Sussex Justices ex parte McCarthy [1924] 1 K.B. 256 (“Sussex Justices”), Lord Hewart CJ stated that it is “of fundamental importance that justice not only be done, but should manifestly and undoubtedly be seen to be done”.
His Lordship laid down the test of whether a “fair minded and informed observer” would have a “reasonable apprehension” of bias.

12. Tests for bias in common law jurisdictions
The English approach (Part 2)
In R v Gough [1993] A.C. 646 (“Gough”), Lord Goff endorsed a two-step test (the “Gough Test”) for assessing the existence of apparent bias.
First, the court should ascertain all of the relevant circumstances of the case.
Second, the court should see if there is any real danger of bias as a result, i.e., whether there is a real possibility of bias.

13. Tests for bias in common law jurisdictions
The English approach (Part 3)
In Porter v Magill [2002] 2 A.C. 35 (HL), the House of Ldos established that the correct test is whether all of the circumstances of the case, as ascertained by the court, would lead a “fair minded and informed observer” to conclude that there was a “real possibility” of bias (the “Porter Test”).

14. Tests for bias in common law jurisdictions
The Indian approach
Supreme Court of Indian in International Airports Authority of India v KD Bali & Anr (1988) (2) SCC 360; 1988 AIR 1099 (“KD Bali”) laid down the legal test to be applied in determining whether there were “justifiable doubts” about an arbitrator’s independence and impartiality: “not every suspicion felt by a party which must lead to the conclusion that the authority hearing the proceedings is biased… the apprehension [of bias] must be judged from a healthy, reasonable and average point of view and not on mere apprehension of any whimsical person.”

15. Comparison of tests for bias
FIRST LIMB
(VANTAGE POINT)
SECOND LIMB
(THRESHOLD)
Sussex Justices
“fair minded and informed observer”
“reasonable apprehension”
R v Gough
through the eyes of the court
“real danger”
Porter v Magill
“fair minded and informed observer, having considered the facts”
“real possibility”
KD Bali
“healthy, reasonable and average point of view and not on mere apprehension of any whimsical person”
“apprehension” or “real likelihood” (?)

16. Interpretation of Model Law
Standard of “justifiable doubts” applied by courts worldwide:
“where the circumstances invoked gave rise to reasonable grounds for objectively suspecting its impartiality, and that proof that the arbitrator actually lacked impartiality was not required”: Kammergericht Berlin, Germany, 28 Sch 24/99, 22 March 2000 (Berlin‘s Higher Regional Court)
The fact that one of the parties happens to be represented in the opening stages of the arbitration by a solicitor with whom the challenged arbitrator has had a social and professional relationship in arbitration-related matters has been found not to raise justifiable doubts as to that arbitrator’s impartiality and independence: Jung Science Information Technology Co. Ltd. v. Zte. Corporation [2008] HKCFI 606 (HK Court of First Instance)

17. Interpretation of Model Law
Standard of “justifiable doubts” applied by courts worldwide:
Justifiable doubts as to an arbitrator’s impartiality or independence arise when the arbitrator is a government minister and the dispute relates to a contract to which the minister is a party: Desbois v. Industries A.C. Davie Inc. [1990] CanLII 3619 (Court of Appeal of Quebec)
Arbitration clauses in government contracts providing that an employee of the governmental department at issue will act as arbitrator are neither void nor unenforceable, as it can be assumed that when senior officers of government, statutory corporations or public sector undertakings are appointed as arbitrators, they will function independently and impartially: Indian Oil Corporation Ltd and Ors v. Raja Transport Pvt Ltd SCC 520

18. National Arbitration Laws
English Arbitration Act 1996, s 24(1)(a)
S 24(1)(a) Power of court to remove arbitrator
A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on… grounds that circumstances exist that give rise to justifiable doubts as to his impartiality…
The English Act does not refer to “independence”.
1. Explaining the omission of “independence”
The UK Departmental Advisory Committee had concluded, in its assessment of the Model Law, that “independence” was neither necessary nor desirable as a ground of challenge. It took the view that a lack of independence has no significance unless it also gives rise to justifiable doubts about the impartiality of the arbitrator, and doubted whether anything meant to be covered by a lack of independence would not also lead to an appearance of arbitrator partiality (i.e., independence is otiose when impartiality is already required): Williams & Kawharu on Arbitration, p 145. Further, the DAC feared that including independence in the English Act would “give rise to endless argument… where almost any connection (however remote) has been put forward to challenge the independence of an arbitrator”: Williams & Kawharu on Arbitration, p 145.

19. National Arbitration Laws
New Zealand Arbitration Act 1996, Art 12(2) of Schedule 1
Art 12(2) Grounds for Challenge
An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to that person’s impartiality or independence. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
This wording tracks the wording of Art 12 of the Model Law closely.

20. National Arbitration Laws
The Model Law wording has been adopted in its entirety in, amongst others, Australia, Canada, Germany, The Netherlands, and Singapore. For ease of reference:
Art 12(2) Grounds for Challenge
(2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.

21. Independence Prospective
May be factually and objectively assessed on the basis of past and existing relationships
Easier to prove
It may be possible for an arbitrator to be independent in the sense of having no relationship or financial connection with one of the parties, and yet not be impartial: Justices Dr B.P.Saraf and S.M. Jhunjhunuwala, in Law of Arbitration and Conciliation, 5th Ed (Snow White Publications, 2009), p 341

22. Impartiality Retrospective (but may be prospective) A state of mind
More difficult to prove
An arbitrator who is not independent of one of the parties may yet be capable of giving an impartial view of the merits of the case: Law of Arbitration and Conciliation, p 341

23. Indian Arbitration Law
Indian Arbitration and Conciliation Act 1996, s 12(2)-(3)
S 12(2)-(3) Challenge
(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.
(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if:- (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality...

24. The End
Q & A