Whether arbitral institution's rule restricting multiple appointments of an arbitrator by a party was an unreasonable restraint
There has been recent caselaw debating the issue of whether, and to what extent, an arbitrator can accept multiple appointments from the same party (or a party connected to the same party). The International Cotton Association ("ICA") was concerned that there was a perception that its arbitration process had a pro-merchant bias because of repeat appointments by a merchant of the same arbitrator (which also contributed to a perceived risk of delay because a small number of arbitrators were taking on a large number of appointments at the same time). As a result, it introduced the so-called "3 and 8 rule" into its Arbitrators' Code of Conduct i.e. an arbitrator may only accept up to 3 appointments for a party or related party per calendar year and can have no more than 8 active first tier cases open at any one time.
The claimant, a full-time arbitrator in ICA disputes argued that the rule constituted an unreasonable restraint of trade. Foxton QC has now dismissed that claim. He held as follows:
- The ICA did not have to wait until there had been a challenge before changing its Code of Conduct.
- The issue of repeat appointments and possible delay has been dealt with in different ways by different international arbitration institutions. For example, disclosure to the parties (leaving them to make their own challenge) is often required but this can result in extra cost and delay.
- Being an arbitrator is a trade and so the doctrine of restraint of trade would apply. Furthermore, there could be circumstances in which a provision in an arbitration institution's rules relating to the acceptance of appointment as arbitrators could be subject to the doctrine of restraint of trade: "it is always possible for a provision in a class of contracts not ordinarily subject to the doctrine to be so unusual and egregious that there "comes a point" when the doctrine applies".
- However, on the facts here, there was no unreasonable restraint of trade. Concerns about impartiality and delay are legitimate objectives for the ICA to address (and a topic of general concern in the international arbitration community): "The particular mechanisms adopted by the ICA fall well within the range of reasonable options open to them for the purpose of meeting the legitimate objectives I have identified".
- Although not required to decide the point, the judge added that the fact that the claimant could have accepted appointments from other commodity associations would not have prevented a restraint of trade finding. The claimant's particular expertise was as a cotton arbitrator, and the overwhelming majority of international cotton was carried on ICA terms.