The Arbitration Institute of the Stockholm Chamber of Commerce has announced that it will provide reasons for its decisions on challenges to arbitrators, making it the third institution to do so.

From 1 January 2018, the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) will begin providing reasons for its decisions on challenges to arbitrators, joining the London Court of International Arbitration (LCIA), which was the first to do so in 2006, and the ICC International Court of Arbitration (ICC) that followed suit in 2015.

According to a release, the SCC Rules do not require the board to motivate any of its decisions, including those related to challenges. However, it has chosen to do so occasionally, in order to benefit parties and arbitrators.

The new policy means that the organisation will provide reasoned decisions on all arbitrator challenges decided by the board, unless the parties agree otherwise.

Annette Magnusson, secretary general at the SCC, said in a statement: “We believe that giving parties and arbitrators insight into the board’s decision-making with regard to challenges will further enhance their confidence in the arbitral process.”

Transparency is vital

The word transparency in now a buzzword for institutions to inform commercial parties and legal practitioners of its processes.

Speaking to CDR, James Hope, partner and head of litigation and arbitration at Vinge in Stockholm, and a member of the SCC board, tells CDR: “What’s particularly interesting is this whole requirement for transparency,” and adds that “the arbitral institution is the final decision-maker on this issue, which means at least as far as we were concerned, natural justice generally suggests that you need reasons before a final decision”.

Clare Ambrose, an arbitrator at 20 Essex Street, states that “it’s not that surprising that the SCC is following the LCIA and the ICC and there are good reasons of legitimacy and transparency for giving some reasons for these decisions”.

This drive towards transparency has resulted in institutions consistently updating and amending their rules and guidance. In July 2016, the ICC revised its process for transparency, giving its users more clarity during the scrutiny process, particularly.

Pontus Scherp, partner at Norburg Scherp in Sweden, explains: “There has been lately a growing use and demand of transparency in arbitration in general, which will “enhance the transparency in the arbitration process more”.

Referring to the 2015 International Arbitration Survey, conducted by the Queen Mary University of London and White & Case, which collated views from stakeholders on the improvements of international arbitration, Scherp says that “transparency on this issue… ended up at the top of the wish list”.

Philippa Charles, partner and head of international arbitration at Stewarts explains that the move by the SCC is “part of a general drive towards transparency in arbitration administration, which institutions have been working on for the last several years. The SCC’s approach mirrors and in some cases amplifies the approach which has been taken by the LCIA and also by the ICC”.

She continues: “I think overall, the generation of a body of reasoned decisions in relation to arbitrator challenges is a useful resource, both for inexperienced arbitrators and more experienced arbitrators (and party counsel) to understand the application of the principle in practice”.

Publication and tactics

As the LCIA, the ICC and the SCC have demonstrated, there is collective thought for greater transparency for all facets of arbitration, including on challenges, which could perhaps prevent parties from using them tactically.

Clarifying the new SCC development, Ambrose explains that the decisions themselves are still going to remain confidential to the parties and will not be in the public domain, so in that sense transparency is limited; although most institutions do then publish summaries of their decisions that are anonymised.

While challenges are now more transparent, Ambrose believes that publishing reasons for decisions will not stop parties using challenges tactically, but adds that: the reasons will assist the parties in understanding what led the institution to make its decision: “When the decisions are published in summary form, there will be greater knowledge.”

Expanding on that view, Charles explains that “if a party is determined to make a challenge, even in a set of circumstances that are equivalent to those that have already been decided and published, they’ll go ahead anyway, because if they’re making a challenge for tactical reasons, either to buy time or create disruption, then the mere fact that a similar challenge has previously been dismissed won’t necessarily restrain them from doing so”.

Hope states that the use of an arbitral challenge as a strategy is an interesting consideration, adding that “if you put in reasons, sometimes people can let and invoke those reasons and try to suggest that that gives them grounds for further complaint”.

However, he stresses that this is something the SCC is alive to and takes very seriously.

He says that decisions involve the SCC’s entire board, including Swedish and international members, so when the board makes a decision, it is not simply off-the-cuff.

Arbitrator challenges

The statistics for challenges show how frequently or infrequently they are used. In April, the LCIA published its facts and figures for 2016, revealing that a total of six challenges were made to arbitrators appointed under LCIA Rules.

There were 16 challenges against arbitrators last year at the SCC, of which 70% were rejected. For the small number of requests for release, half resulted in the resignation of an arbitrator.

Whereas the ICC had a total of 50 challenges on 2016, whether for impartiality, independence or other reasons, of which just five were accepted by the court.

The obvious issue for challenge is in the investment treaty space, “where you have someone sitting as arbitrator, who is also acting as counsel in other investment treaty cases and taking a particular line as party counsel which is said to amount to a fetter on their neutrality as arbitrator on that issue”, Charles says.

While in the commercial arbitration space, “it’s much more likely to be the case that someone’s going to be challenged if there’s a perception that they’ve, for example, been appointed too frequently by a particular firm”, she adds.

Summarising the reasons behind the SCC’s move, Hope concludes: “The intention is to provide an even better service to the parties, I think it should be seen in that light, that’s what we’re trying to do.”

Meanwhile, in October, the SCC named five new board members with litigation and arbitration experience, who will be appointed as of 1 January 2018.

This article first appeared in Commercial Dispute Resolution (CDR): SCC to provide decisions on arbitrator challenges.