How close is too close? Independence and impartiality of arbitrators and the duty to disclose

On 10 January 2023, the Paris Court of Appeal set aside an arbitral award, issued in November 2020, in an ICC arbitration between Douala International Terminal (DIT) and the Autonomous Port of Douala (PAD).

The Court ruled that the arbitral tribunal was improperly constituted on the grounds of Article 1520, 2 of the French Code of Civil Procedure. The president of the arbitral tribunal, Professor Thomas Clay, had not disclosed his close relationship with DIT's counsel, Professor Emmanuel Gaillard. The plaintiff to the appeal relied on Thomas Clay's tribute following the death of Emmanuel Gaillard.

Independence and impartiality, a fundamental principle

An arbitrator’s independence and impartiality are fundamental principles of arbitration, enshrined within most arbitration rules (Art. 11.1 ICC Rules, Art. 14.1 DIAC Rules, Art. 13.1 SCCA Rules) as well as national frameworks. Whilst it is natural to consider independence and impartiality jointly, these are distinct concepts to be separately assessed. Independence is concerned with the relationship between an arbitrator and one or more of the parties, i.e. an objective test. Impartiality is concerned with potential bias that an arbitrator may have for a party or an issue in dispute, and refers to the arbitrator’s state of mind. Impartiality may be defined by the absence of prejudice, and thus is a subjective test and more difficult to measure.

An arbitrator’s lack of independence or impartiality may constitute a ground for a challenge against an arbitrator or the award issued by the arbitral tribunal. When assessing independence or impartiality, a careful balancing act is required to ensure that parties are afforded a fair hearing and that unnecessary challenges against arbitrators are avoided. In this blog post, we discuss an arbitrator’s duty to disclose as well as a recent Paris Court of Appeal matter where the failure to make a disclosure of a close friendship resulted in an award being set aside.

A duty to disclose 

Most jurisdictions provide for an obligation to be independent and impartial, and a duty to disclose any circumstances likely to give rise to justifiable doubts of an arbitrator’s independence or impartiality. This duty is a continuing obligation, requiring the arbitrator to disclose without delay, any such circumstances which may arise both before or during the course of the proceedings.

An arbitrator must disclose three different types of circumstances. Firstly, a prior involvement in the dispute in some other capacity, any direct or indirect financial interest in the outcome of the dispute and finally, any past or present relationship with a party, an affiliate of a party, counsel to a party, another arbitrator, a witness or expert. In making such a disclosure, the appointed arbitrator should ask themselves whether the facts and circumstances disclosed are likely, in the eyes of the parties, to cause doubts as to their independence and impartiality.

Whilst not a novel issue, an arbitrator’s independence and impartiality is, from time to time, the subject of a challenge. As there is no hard and fast rule, the International Bar Association provides a set of Guidelines on Conflicts of Interest in International Arbitration to promote common standards of independence and impartiality (The IBA Guidelines). Although the IBA Guidelines are not legally binding, they comprise a series of general standards, followed by non-exhaustive lists of circumstances, which provide guidance on the practical application of the general standards. The IBA Guidelines are used by arbitral tribunals and courts alike to ascertain international best practice. The IBA Guidelines provide a ‘traffic-light’ system, whereby ‘red’, ‘orange’ and ‘green’ lists set out specific situations warranting (or in the case of the ‘green’ list, not warranting) disclosure. Importantly, in the presence of any doubt as to their ability to be impartial or independent, an arbitrator should simply refuse appointment or, if already appointed, refuse to continue to act (See IBA Guidelines, General Standard 1 and (2)(a)).

The consequences of a dependent and partial arbitrator may be major and may force the arbitrator to resign. If a challenge takes place during the proceedings, delay and additional costs will likely ensue. If a challenge is brought post-award, there is a risk that the recognition and enforcement of the award is denied. An arbitrator’s declaration of impartiality and independence is not taken lightly.

But, despite the guidance, the question remains… how close is too close and thus require a disclosure? 

How close is too close?

On 1 April 2021, the worldwide renowned scholar, Professor Emmanuel Gaillard passed away suddenly. He was counsel for DIT in an ICC arbitration against PAD. An award was issued in November 2020. Following Professor Gaillard’s death, many tributes were published to commemorate his work and legacy. One of them was written by Professor Thomas Clay, president of the arbitral tribunal in this arbitration.

Clay’s tribute was published on 15 April 2021. In his tribute, Professor Clay wrote he had had “regular meetings” with Emmanuel Gaillard for 21 years, starting when Gaillard was a member of his thesis jury; that they had developed a friendship which became “more personal” during trips abroad together; and that he “consulted him before making any important decision”. He also wrote that “I admired him, I loved him”.

Five days later, on 20 April 2021, PAD challenged Professor Clay on his tribute, specifically that his friendship with Emmanuel Gaillard which had revealed a close and personal relationship, had not been disclosed in his statement of independence and impartiality. This would not have come to light if Professor Gaillard had not passed away.

On the one hand, the Paris Court of Appeal, in a decision issued on 10 January 2023, acknowledged that “the final words (“I admired and loved him”) cannot be considered as the mark of an alienation of its author towards Professor Gaillard, but must be understood as the expression of a tribute paid to a respected figure in arbitration law”(See para. 63). However, on the other hand, the Court was concerned that Professor Clay “consulted Professor Gaillard “before making any important choice”, thus revealing the intensity of a relationship that goes beyond mere ordinary friendship” (See para. 64). The Court further added that, this situation would “lead the parties to believe that the president of the arbitral tribunal might not be free to make his own judgement and thus create a reasonable doubt in the mind of the PAD as to the independence and impartiality of this arbitrator.” (See para. 70).

Whilst there was no suggestion that Professor Clay had breached his duty of impartiality or independence, ultimately, the Paris Court of Appeal considered that in breach of article 1520, 2 of the French Code of Civil Procedure, Professor Clay’s failure to disclose his relationship with the counsel meant that the arbitral tribunal was not properly constituted, and the award should be set aside.

Conclusion

The decision of the Paris Court of Appeal serves as a timely reminder that whilst it is acceptable for arbitrators and parties to be friends, it is important to err on the side of caution and any doubt should be resolved in favor of full disclosure.