‘‘ It is of fundamental importance that justice not only be done, but should manifestly and undoubtedly be seen to be done’’.
Lord Hewart CJ
The above statement as used almost eighty five years ago in the case R v Sussex1 and it is often remains a standard in many judicial decision-making, both in the courts and in arbitration proceedings. There are common tests which are applied when the challenge relates to the arbitrator’s performance in conducting the arbitration proceedings under the rules of different arbitration institutions. It has been set out under the rules of the majority of institutions that the duty of an arbitrator is to act “fairly and impartially” between the parties giving each of them a reasonable opportunity of presenting its case. In this article we will discuss about the independence and impartiality in the appointment of arbitrators under Dubai International Arbitration Centre (the DIAC) and Abu Dhabi Commercial Conciliation and Arbitration Center (the ADCCAC) Law. Specifically, this article will discuss grounds available for parties to challenge arbitrator’s appointment under both – DIAC and ADCCAC Law.
In general in arbitrations proceedings, there will be a three person arbitral tribunal comprised of one arbitrator selected by each of the parties and a third usually the chairman, selected independently. In others there will be a single arbitrator appointed by the arbitration center.
GROUNDS FOR CHALLENGING THE APPOINTMENT OF ARBITRATOR UNDER UAE LAW - DIAC and ADCCAC
There are few qualifications which are considered for determining whether the appointment of the arbitrator can be challenged:
(i) Relationship between the arbitrator and the parties: In a relationships where one of the parties to an arbitration has business or financial relations with an arbitrator in such cases there is an apparent possibility that the arbitration proceedings shall be impacted and it is less likely that the arbitrator would not give bias decision. Someone who was employed for a long period of time by one of the parties may well be unable to act impartially, even if he believes himself to be able to do so. It is important to consider that the arbitrator may have sufficient level of information about that party, which could lead him to come to a decision at variance and it could have been different decision if he had not possess such information. It is possible (if unlikely) that an arbitrator may not be entirely independent of both parties as a result of a relationship with one or the other or a connected third party, but may be able to set aside that relationship and come to a decision entirely impartially, based on the facts and the relevant law alone.
(ii) Relationship between the arbitrator and the parties’ lawyers: One of the basis for challenging the appointment of an arbitrator on the grounds of lack of independence or impartiality is the relationship between the arbitrator’s law firm and the party2 . It is notable that where the arbitrator’s spouse or other close relative is acting for one of the parties, or is a partner in the law firm that represents that party challenges may also upheld the decision.
(iii) Related proceedings: This is something critical where it is difficult to establish where a party is involved in two or more arbitrations on similar facts/circumstances however with different parties. In such instances to make sure that the results should be the same, the other party may stress to appoint same arbitral tribunal in order to avoid inconsistencies that could arise as a result from differently constituted tribunals. On the contrary, it is not necessarily fatal to an arbitrator’s independence and impartiality, when pre-existing information becomes pre-conceived beliefs about the merits of a particular party’s case then the grounds for challenge become strong.
(iv) Arbitrator’s behavior: As to the disqualifications relating to arbitrator behavior, these tended to be based on the subjective question of impartiality, that is, the real possibility of bias by the arbitrator. In one matter the arbitrator was disqualified for responding intemperately to a challenge that would not have otherwise succeeded. In addressing the grounds of the claimant’s challenge, the arbitrator characterized the claimant’s submissions as fictitious, false and malevolent, and stated that certain statements were viciously attributed by claimant’s counsel. Although the Division that was considering the challenge did not think the basic claims alleged by the claimant sufficed to remove the arbitrator, it considered that the self-evident tension and ill feeling that had arisen as a result of the challenge had created justifiable doubts as to the arbitrator’s impartiality.
(v) Other Reasons for disqualification: Other instances in which arbitrators were disqualified concerned ex parte contact between an arbitrator and a party. In one challenge, an arbitrator had given a party advance notice about the content of an award before it was published. In the other challenge, the arbitrator met privately with one party twice, behind closed doors, and the other party was neither invited nor informed. In addition, the arbitrator accused the challenging party of entering his private break-out room and stealing grapes, and then lying about it. The same arbitrator also unilaterally ordered the deletion of certain passages from the transcript, over objection of the respondent’s counsel. It is inferred that the arbitrator had a manifest lack of high moral character, or a manifest lack of independent judgment. This presents a very high bar to disqualification. Arguably, this standard is higher than under most commercial arbitration rules, where arbitrators can be disqualified if there is a reasonable or justifiable doubt about their independence or impartiality. Commercial arbitrators have held that the test of independence was a test for appearance of bias, while the test of impartiality was a test for the actual presence of bias. However, when disqualification requires that the arbitrator demonstrate a manifest lack of the required qualities to be an arbitrator, there is no basis for removal if there is only an appearance of bias.
In Dubai Court of Casastion (75 of 2007 heard and decided on 7 April 2008) the court discussed the aspect relating to nullity of arbitrator’s award. The court referring to Article 39 of the earlier arbitration law of Dubai being Decree 2 of 1994 ratifying the Rules for Commercial Conciliation and Arbitration of the Dubai Chambers of Commerce and Industry noted that the arbitration proceedings could be stayed if there is an obstacle of law or of fact precluding a continuation of the proceedings, until such time as the obstacle is removed. It further noted that the proceedings should in particular be stayed in the cases enumerated in (a)-(f) of that article, but those circumstances do not constitute an exhaustive list. The Court held as under:-
“Consequently, resort may be had to other provisions of the law and to general rules in order to ascertain whether or not there is any legal obstacle barring a continuation of the arbitration proceedings, and whether they should be stayed until the obstacle is removed, irrespective of the circumstances enumerated in that article in particular.”
The Court further held that an “application for the recusal of an arbitrator is a legal circumstance resulting in the stay of the litigation before the court before which the application for recusal is made, until such time as a determination is made on the application by the competent authority, and the other party may not insist that the arbitration proceedings continue, notwithstanding that the facts alleged are untrue, because the court before which the application for recusal is made is not the tribunal that is competent to try the truth or otherwise of the facts alleged. If an arbitrator insists on proceeding with a hearing of the arbitration despite his knowledge that there is an application for recusal, any steps that he takes will be void, and this will affect any award issued, under article 216 of the Law of Civil Procedures, so long as the law does not permit him to proceed with the hearing of the case, pending an application for recusal, which is pending before the court, and has not yet been decided on.”
The Abu Dhabi Court of Cassation in Case 447 of 2010 (decided on 30 September 2010) has summarized the position as to invalidity of arbitration award and held that a claim for invalidity of arbitration award may be accepted in the cases where:-
- an arbitration award is made in absence of agreement to arbitration between the two litigating parties;
- arbitration award is based on an instrument which is invalid;
- arbitration agreement or instrument which lapsed due to the passage of the legal time limit;
- the arbitrator went beyond the instrument limits or breached one of the public order rule;
- the award was rendered by arbitrators who were not appointed according to the law;
- the award was rendered by persons who were not authorized to render the award in the absence of the other arbitrators;
- the principle claim in the dispute was not decided on;
- due to the breach of right of defense; or
- defenses for invalidity in the award or in the procedures that had effect in the judgment.
PROCEDURES FOR CHALLENGING UNDER DIAC AND ADCCAC RULES
Arbitration proceedings in the UAE are governed by Federal Law No.11 of 1992 (Art 203–218), as amended by Federal Law No.30 of 2005 (the Civil Procedure Code or CPC), which is not based on the UNCITRAL Model Law (although the DIFC Arbitration Law is based on UNCITRAL Law).
In DIAC Arbitration rules, Article 9 states that all arbitrators shall be appointed by the Centre, according due regard to any method of appointment agreed upon in writing by the parties. The Centre has a discretion to decline such appointment where any nominee proposed by a party if it considers the nominee to be lacking independence, impartiality or otherwise unsuitable. In such case, the Centre can request from that party a new nomination within 21 days from the date of receiving notification of the Centre’s decision. If that party failed to nominate an arbitrator or if the Centre refused to appoint the nominated arbitrator, the Centre shall appoint the arbitrator.
Article 13 clearly states that if any arbitrator acts in deliberate violation of the Arbitration Agreement (including these Rules) or does not act fairly and impartially as between the parties or does not conduct or participate in the arbitration with reasonable diligence, avoiding unnecessary delay or expense the Centre may deem that the arbitrator is unfit to serve. An arbitrator may be challenged by any party if circumstances exist that give rise to justifiable doubts as to his impartiality or independence. A party may challenge an arbitrator it has nominated, or in whose appointment procedures it has participated, only for reasons of which it becomes aware after the appointment has been made.
Requirement: A party who intends to challenge an arbitrator shall, within 15 days of the formation of the Tribunal or (if later) within 15 days of becoming aware of any circumstances referred to in paragraphs 2 and 3 above send a written statement of the reasons for its challenge to the Centre, the Tribunal and all other parties. Unless the challenged arbitrator withdraws or all other parties agree to the challenge within 15 days of receipt of the written statement, the Centre shall decide on the challenge.
Similarly under ADCCAC Rules the Article 11 Challenge and Objection to Arbitrators where the arbitrator shall not be challenged unless circumstances arise raising justifiable doubts over his neutrality or independence or if the arbitrator proves to be lacking in qualifications required and which the parties have jointly agreed upon beforehand. The Party can challenge the appointment, unless the reason for such challenge became known after the appointment.
Requirement: A challenge request shall be submitted to the Director stating the reasons for it and accompanied by supporting documents and evidence, within a period of fourteen (14) days from the date of the challenging Party being advised of the arbitrator’s appointment or from the date the applicant for the challenge becoming aware of the circumstances justifying its request.
The Abu Dhabi Court of Cassation in Case 58 of 2007 (decided on 30 October 2007) referring to Article 209 of the Law of Civil Procedures has held as under:
“It is settled law that if the original contract containing an arbitration clause is void, then the arbitration clause itself will consequently be void, and jurisdiction will thus vest in the ordinary judiciary having general authority over the determination of the dispute. It is also settled law pursuant to article 209(2) of the Law of Civil Procedures that if during the course of the arbitration a preliminary question arises that is outside the authority of the arbitrator, the arbitrator must stay the proceedings until a final ruling on that point is made by the courts.”
In light of the above discussions it is important to note that parties should know the reasons why their challenges to an arbitrator have succeeded or failed. This knowledge can be useful to parties in determining their future actions both with regard to selecting arbitrators and deciding whether to challenge an arbitrator. It can also be useful to arbitrators in knowing when they should refuse to accept an appointment, what kind of information they should disclose, and what kind of conduct is expected from them while serving as an arbitrator. As a result, arbitrators may be less likely to accept appointments when they might be challenged, and more likely to step down voluntarily if they are challenged on a ground that raises reasonable issues about independence or impartiality.