An Examination Of The Liability Of An Arbitrator In International Arbitration

By Oyetola Muyiwa Atoyebi, SAN

INTRODUCTION

Arbitration is an alternate method of dispute resolution where a neutral party gives a final decision called an Award to determine the rights and obligations or liabilities of parties in the event of a dispute. The concept of Arbitration in itself is widely understood. However, it is essential to determine what can be regarded as international arbitration.

Under the model law approach, Arbitration is categorized as international arbitration if the parties to the business that gave rise to the dispute carry on business in different independent states or the arbitration proceedings, by the election of the parties, take place in a state different from the state of the parties. Where the business is performed partly in different states or parties expressly state that different states are involved in the business, arbitration relating to such a business is regarded as international arbitration.

OBLIGATIONS OF AN ARBITRATOR

The main duty of an arbitrator in international arbitration is to ensure that arbitral proceedings are carried out impartially and efficiently. This forms the basis for all other obligations owed by the arbitrator. The duty owed by the arbitrator terminates upon the successful determination of the dispute. The manner of relationship that exists between the arbitrator and the parties determines the specific duties owed by the arbitrator in the arbitration proceedings.

Two major schools of thought approach the relationship between the arbitrator and the parties from different perspectives. One school argues that the relationship is contractual in nature and formation while the other maintains that it is procedurally quasi-judicial.

The contract theory school opines that the relationship between the arbitrator and the parties is contractual in nature because it is premised on the agreement of the parties. When the arbitrator accepts the appointment, it is called receptum arbitrii meaning receptum of the arbitrator[1].

Bernard, a contemporary member of this school of thought is of the opinion that international arbitration is ‘a contract sui generis, governed by the rules appropriate to it and which must be dealt with by taking into account both the principles of the contract and the particular nature of the function exercised by the arbitrator.’ What this means is that the obligations and duties of the arbitrator can be inferred from the contract and are governed by the principles of the contract[2]. What this implies is that the arbitrator is viewed as a professional who is duly remunerated and therefore, there is the existence of mutual contractual obligations.

Following the Contract theory, the obligations that are agreed on and contained in the agreement are binding on the parties. There are however implied conditions such as the duty to act in utmost good faith and the duty to conduct the proceedings according to the extant laws.

Article 35 of the International Chambers of Commerce Rules of Arbitration provides that the arbitrator also has a duty to ensure that the award given is valid and not open to frivolous contest. This includes a duty to conduct the proceedings impartially, without collision with any of the parties.  He is also expected to carry out his duties within the stipulated time or where none is agreed on, a reasonable time without unnecessary delays, unreasonable resignation, or adjournments.

The other school of thought that views the role of an arbitrator as akin to that of a Judge, highlights that the obligations of an arbitrator are similar to a Judge and not just based on a contract that exists between the parties. He is often described as a “private Judge” with the discretion to accept or reject disputes referred to him. The arbiter’s obligations also include impartiality and confidentiality. This provides that an arbitrator is not expected to privately meet with any of the parties or prematurely discuss the outcome of proceedings with a party. The arbitrator is not expected to receive secret or extraneous fees from the parties or to intentionally delay the proceedings. The arbitrator is not even expected to randomly abandon the dispute halfway into the proceedings or conduct himself in a manner that causes delay.

LIABILITY OF AN ARBITRATOR

There are different natures of liability that can be incurred by an Arbitrator in international arbitration. All of these are subject to the various forms of immunity enjoyed by arbitrators under different laws and different jurisdictions[3]. The liabilities are:

Civil liability: An arbitrator can incur liability for damages if he breaches any of the aforementioned obligations earlier discussed. These obligations include those expressly agreed upon by the parties and the arbitrator and those imposed by law. Where an arbitrator fails to conduct the proceedings in line with the applicable laws or breaches his duty of confidentiality, he can be held liable. The liability of the arbitrator is not just limited to parties to the dispute but extends to third parties that suffer injury by the conduct of the arbitrator. This can include allegations of unreasonable resignation, acts that cause unnecessary delay or lack of due diligence[4].

Criminal liability: Criminal liability is slightly more technical than civil liability. This is because the law regulating or governing every arbitration proceeding has an adapted description of the crime. For instance, in Argentina laws, misconduct in arbitration proceedings attracts criminal liability but the same is not covered by Spanish laws. There is also the existence of a stricter burden of proof before the arbitrator can be held criminally liable. Corruption, bribery, and forgery are some examples of offences an arbitrator can be held criminally liable for.

IMMUNITY OF ARBITRATORS IN INTERNATIONAL ARBITRATION

Generally, Arbitrators enjoy immunity in order to prevent malicious litigation by unsuccessful parties who intend to bedevil the arbitrator. The immunity enjoyed by arbitrators in international arbitration can be adequately grasped under the two different approaches to the relationship between the arbiter and the parties earlier discussed; the contract approach and the quasi-judicial approach.

Under the theory that the arbitrator is a “private Judge” and acts in a quasi-judicial capacity, he is granted full immunity in the same manner as a Judge except where he wilfully and knowingly failed to apply due diligence and care in the discharge of his duties. The basis for this is the principle of judicial immunity as was confirmed in the case of Bremer Schiffban v South Indian Shipping Corp Ltd,[5] where it was held that ‘Courts and arbitrators are in the same business, namely the administration of justice’. This means that just like a Judge, an arbitrator cannot be held liable for the decision he arrives at in good faith and exercise of due care and skill irrespective of allegations or charges of error. States such as the Netherlands adopt this approach, giving near-absolute immunity to arbitrators.

Civil and common law jurisdictions approach the immunity of arbitrators from different angles and there is no unified stance on the boundaries of the immunity of the arbitrator. Common law jurisdictions align with the position of absolute immunity save in acts done in bad faith as provided under the quasi-judicial approach. Countries that fall under this umbrella include Australia, Canada, the USA, and even England which codified the same in Section 29 of the English Arbitration Act. Civil law countries such as Italy, France, Spain, Austria, and Germany are more disposed to the Contract theory of International arbitration and this means that the arbitrators enjoy a level of immunity but they are liable for acts of contractual breach.

LIMITATIONS TO THE IMMUNITY OF ARBITRATORS

There are varying degrees of limitation to the immunity of arbitrators in different countries owing to the divergent approaches to immunity in Common and Civil law countries. In civil law countries where the contractual approach to arbitration is favoured, there is more limitation to the immunity enjoyed by arbitrators. This is because arbitrators are liable for breach of contract, error in the application of Laws to the dispute, negligence, and general tortious acts.

The only notable limitation to the immunity of arbitrators in common law countries is that the arbitrator is liable only for acts done in bad faith. Simply put, the arbitrator under common law countries enjoys absolute immunity with only a little allowance for liability[6].

CONCLUSION

Immunity is critical to the effective conduct of arbitral proceedings to ensure that arbiters can carry out their duties without fear of unnecessary or vengeful litigation by dissatisfied parties. The concept of absolute immunity as adopted by Common law countries is however quite worrisome. This is because, the import of this manner of immunity is that the arbiter can conduct proceedings any way he deems fit and cannot be held accountable even for error in the application of the law or negligence, provided he can show that it is not in bad faith.

SNIPPET

The concept of the immunity of arbitrators under international arbitration varies with jurisdiction. The essence of this immunity, however, is to protect arbitrators from vengeful litigation by unsuccessful parties and enable them to carry out their duties without fear or favour.

Keywords: Arbitration, Arbitrator, Immunity, International Arbitration.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN

Mr Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of ADR Practice and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Pwaveno Ditto

Pwaveno is a member of the Dispute Resolution Team at OMAPLEX Law Firm. She also holds commendable legal expertise in ADR Practice

She can be reached at pwaveno.ditto@omaplex.com.ng

[1] B Cremades, Should Arbitrators be Immune from Liability?, International Financial Law Review, 1991

[2] Anastasia Tsakatoura, “Arbitration: The Immunity of Arbitrators. (June

20, 2002), ,” LEx E-SCRIPTA ONLINE LEGAL J < http://www.inter-lawyer.com/lex-e-scripta/articles/arbitratorsimmunity.htm > Accessed 10 April 2023

[3] R. Mullerat, J. Blanch, “The liability of arbitrators: A survey of current practice”, Dispute Resolution

International (2007)  (1) (1) 106

[4] B Hanotiau, ‘Player’s Interaction in International Arbitration’, ICC Institute of Word Business Law, 2012.

[5] 1981 AC 999-21

[6] A. Redfern and M. Hunter, Redfern and Hunter on International Arbitration 6th edn (New York: Oxford

University Press, 2015) p 324