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August 30, 2010

Arbitral Control Over The Ethics of Advocacy: Thoughts

Enactment of a uniform code of ethics governing the conduct of counsel in international arbitrations is a much-discussed topic. Whether cross-cultural standard-setters such as the International Bar Association can, or should, achieve such a complex and difficult mission remains to be seen.

A dimension of the problem that should not be overlooked is that counsel in international arbitrations often will leap at the opportunity to accuse an adversary of an ethical violation. This is rather commonplace in the rough-and-tumble context of American civil litigation, and the problem in international commercial arbitrations exists substantially but not entirely because of the participation of American litigators in the process. The tactical deployment of ethical accusations challenges arbitrators to establish rules and regulate attorney conduct even though their jurisdiction to do so is not well-established by national arbitration laws or institutional rules.

I had a recent encounter with such an issue, while appearing as counsel in an international arbitration seated in New York. It involved the use in the proceedings of client-to-client communications related to settlement. American counsel from New York were on both sides, representing US and Chinese parties, respectively, in a contract dispute governed by Hong Kong law and seated in New York. The Sole Arbitrator hailed from a “Commonwealth” nation.

One counsel (your correspondent) submitted in the proceedings e-mails sent from the Chairman of Party X to the CFO of Party Y. The purpose of the use was to show Party X’s intent to arrange its own finances so as to frustrate enforcement of an eventual award. The communications related to settlement, at least to the extent of saying in substance “you should have been willing to settle for a modest sum, because now that we are arbitrating we will make sure there is nothing left when the time comes to enforce the award.” No agreement of confidentiality had been made regulating use of the communications in the proceedings.

Party X’s counsel claimed an ethical violation by Party Y’s counsel, and sought not only a sanction against Party Y counsel but also the exclusion of the e-mails as evidence in support of Party Y’s application for provisional relief. This claim of an ethical infraction was made without citation to any allegedly applicable law, rule, or code of ethics.

Without revealing how the Sole Arbitrator addressed the matter, I raise the question: How should it be addressed? What legal standards should govern?

In terms of arbitral choice of ethical rules, this case was relatively simple: The opposing counsel were admitted to practice in the same jurisdiction (New York) and that jurisdiction also was the juridical seat of the arbitration. The fact that one party was of Chinese nationality and that the law of Hong Kong was to be used to determine the merits does not point in the direction of using the ethics rules applicable to Hong Kong-licensed lawyers to measure the conduct of New York-admitted counsel. New York’s Code of Professional Responsibility does not address the issue of confidentiality of settlement communications or their use in proceedings. Federal and New York rules of evidence for trials before courts do address the subject as a rule of admissibility, and generally provide that such communications may be admitted as evidence for a purpose other than to prove liability or damages. This left the Sole Arbitrator free to adopt an appropriate rule as a matter of discretion. But in this context, following the rules that apply in federal and New York judicial proceedngs would seem to be in keeping with the reasonable expecations of counsel on both sides.

But suppose that the same alleged infraction occurred in an arbitration seated in Geneva, with French Party X represented by French counsel and New York Party Y represented by its New York lawyer. Suppose further that the French code of professional ethics governing courtroom advocacy would prohibit any use of a client communication related to settlement in a judicial proceeding, but would nevertheless allow a French-licensed advocate when practicing before an international tribunal to follow a more liberal rule applicable in that tribunal. Suppose further that the Swiss code of ethics on this point was essentially the same as French code, including the suspension of the rule’s application in proceedings before an international tribunal that adheres to a more liberal rule.

One can readily see why there such energy being devoted to the enactment of some form of universal code. In this scenario just described, the arbitrators’ sensible first instinct might be to look to Swiss ethics laws for guidance and seek to hold both counsel to the Swiss law ethical standard based on the parties’ agreement on Geneva as the juridical seat of the arbitration (although even this is debatable, as the parties likely agreed upon the seat of arbitration for a number of reasons probably not including its judicial rules of ethics governing advocacy). But the Swiss law in this instance would not provide the needed guidance because it permits compliance even by Swiss-licensed counsel with a rule governing the arbitral proceedings even if the same conduct would be an ethical violation in judicial proceedings. There being no applicable rule concerning use of settlement communications to be found in institutional rules of arbitration or (I presume) in Swiss international arbitration law, the arbitrators are in a position to decide what rule should apply.

One solution certainly is a provision in a uniform ethical code that prohibits all use, or allows particular limited uses, of communications relating to settlement. But until such a code becomes a reality, what is the best practice for arbitrators to follow? As to rules that touch upon advocacy (use of documentary evidence, use of legal authorities, preparation of witnesses, questioning of witnesses, etc.) there must of course be “equality of arms,” and arbitrators would do well to cover a number of such subjects in the first procedural orders. By doing so, tribunals may avoid having to address claims of ethical infractions later on, and will often relieve counsel of a conundrum: whether to engage in the same tactics as the adversary, on the premise that they may be ethically acceptable to the tribunal, or to refrain from such tactics while claiming an ethical infraction, at the risk of giving the other side an advocacy advantage if the tribunal finds the conduct to have been ethically acceptable.

An illustration of this process may be found in the adoption by many tribunals, early in the case, of the IBA Rules of Evidence as “guidelines” for the proceedings. Rule 4.3 of the IBA Rules declares that communications by a party or its counsel with the party’s witnesses in advance of their testimony, to discuss the testimony, is not improper — and this rule is essentially an ethical rule even though it is found in “Rules of Evidence.” The general acceptability of witness contact in international arbitrations, despite its illegality in judicial proceedings in many countries, has come about substantially by virtue of the adoption into procedural orders of the IBA Evidence Rules as guidelines (if not as governing prescriptions).

Much of this ground can be covered with the agreement of the parties, who are likely to be accommodating to the wishes of the tribunal on abstract principles of counsel ethics early in the case. Thus tribunals should have little difficulty securing the agreement of all counsel in most cases that: (i) communications between opposing counsel shall be confidential and not used in the proceedings except by agreement, unless the unilateral use is necessary to disclose that the adversary has acted dishonestly or in bad faith toward the tribunal; (ii) any agreements of the parties concerning the confidentiality of their communications during the proceedings shall be binding upon their counsel regarding use in the proceedings; (iii) counsel shall have an affirmative duty to direct their clients to preserve evidence that may be relevant and material to the proceedings, (iv) counsel shall have an affirmative duty to bring to the tribunal’s immediate attention any circumstances involving an attempt by counsel to influence a witness not to tell the truth, and (v) counsel shall have an affirmative duty to bring to the tribunal’s immediate attention any circumstances indicating a substantive ex parte communication between a party or its counsel and a member of the tribunal.

One Response to “Arbitral Control Over The Ethics of Advocacy: Thoughts”

  1. Arbitrator Control Over Ethics of Advocacy

    I thank Marc for the courtesy of his space in which to express my personal views, which may be found unconventional by some.

    My title is taken from the recent thread, but what a title! Were ever so many questions begged in so short a phrase, not even having the verb needed to make it a proposition? Are there ethics of advocacy? Indeed, what is meant by “advocacy” in an arbitral context and do arbitrators have control of it, and should they? To pose more questions would be, perhaps, an indulgence.

    Like most pseudo-academic, professing non-lawyers, I begin this mini-dissertation by seeking to define my terms, and the only way I have to do that, pace the spirit of Noah Webster (this is Marc’s space) is to refer to the Oxford English Dictionary, which has long been the authority for Great Britain, still the home of the language, if a little overshadowed.

    The first definition, it seems, takes us little further: Advocacy 1. The function of an advocate; the work of advocating; pleading for or supporting. I cannot resist one of the citations in the OED: 1867 CARLYLE Remin. (1881) II. 13 It is a strange trade, I have often thought, that of advocacy. What is there left to say, except, “Amen”?

    Let us try Advocate, for what it is worth; that appears to be more productive: lit. One called in, or liable to be called upon, to defend or speak for.

    1. One whose profession it is to plead the cause of any one in a court of justice; a counsellor or counsel. (The technical title in the Roman law courts, and in those countries which retain the Roman law, as Scotland and France; also in the Admiralty Courts, and many special tribunals existing or historical; but not in ordinary English law courts.)

    Faculty of Advocates: the collective body of members of the bar in Scotland. Lord Advocate, formerly King’s (or Queen’s) A., the principal law-officer of the crown in Scotland, answering to the Attorney-General in England. Judge-Advocate, the officer who manages the prosecution before a court-martial, the supreme officer for the whole army being the Judge-Advocate-General. advocate is also in the city of Aberdeen a local title for a solicitor. devil’s advocate: see DEVIL n. 25b.

    2. fig. and gen. One who pleads, intercedes, or speaks for, or in behalf of, another; a pleader, intercessor, defender.

    b. Specially, applied to Christ as the Intercessor for sinners.

    3. One who defends, maintains, publicly recommends, or raises his voice in behalf of a proposal or tenet. Const. of (for ? Obs.).

    That is precisely as the entry appears at http://dictionary.oed.com/ . Arbitration is not a court proceeding, so the professional definition at 1. does not apply. We are concerned with the literal meaning or the meaning at 2.

    Lawyers sometimes argue that they are not bound by their bar’s code of ethics when in arbitration because they are not in court. Of course that may be a literally true interpretation of the relevant bar code but ethics, I argue, are not embodied in a written code.

    Arbitration is the product of an agreement. The parties agree to the settlement of a dispute or question at issue by one to whom they refer their claims in order to obtain an equitable decision. It follows that nothing (and a fortiori advocacy) should be permitted to interfere with the equity of that decision.

    In court the advocate’s professional task is to persuade. It is usual for a party in court to employ an advocate even when he or she is well able to speak for themselves. That is at least in part because the presentation of one’s case may be impeded by procedure as well as because of the premium on oratory in the process (especially in courts of the Common Law).

    In arbitration the advocate’s task is to inform the Tribunal, rather than to persuade it. That is because the parties are presumed to have intended that the product of the process will be the equitable decision of the definition. Whatever their later intentions may become, however much one or the other may hope to win, the clear implication of their agreement is that it was made in order to obtain an equitable decision.

    Whether the advocate in an arbitration is a practising member of a bar or not, even if he or she is, horribile dictu a layman, male or female, that advocate has an ethical duty, rooted in the agreement of the parties, not to mislead the tribunal from its equitable task.

    The same considerations apply to the evidence of witnesses. There is an implication that the parties will procure witnesses who will tell the truth, because otherwise the purpose to obtain an equitable decision, might be frustrated, contrary to the agreement.

    As it happens, of course, most legal systems have laws against wilful misstatements or misleading conduct, whether in or out of Court. And some, but not all, permit oaths to be administered to arbitral witnesses, which makes lies a criminal matter; could we devise an oath to be taken by advocates?

    Now how shall the arbitrator or arbitrators control the ethics of advocacy. Should he? Can he? (or she).

    I argue that arbitrators don’t have the authority of the Court. They are, however, masters of their own procedure, as Courts, and theorists, throughout the world have pointed out. They are entitled, perhaps obliged, to tell the parties when an advocate’s conduct endangers the obtaining of an equitable decision. It is conceivable, in an egregious case, that it would be in order for a Tribunal to exclude from the room, temporarily or permanently, a person whose conduct was persistently inimical to that paramount intention of the parties, whatever his or her profession. Whether there is good authority for that last proposition I leave for the commentary of Marc and his subscribers.

    Have fun.

    Geoffrey M. Beresford Hartwell