Marc J. Goldstein Arbitrator & Mediator NYC
November 02, 2022

On Overlapping Appointments

In a dream last night, YOU, Dear Wing, received an email from the Chair of the Tribunal, “Re: New Case”:

“My Dear Colleague X:
I am serving as a Wing in a recently filed ICC Arbitration with an amount in dispute in excess of US $3 Billion. Together with my Fellow Wing Ms. Z, who knows and admires you, as I do, we are charged with the joint selection of the Chair. I would like to put your name forward if OK.
The parties and counsel are completely different from our current case together and there is no subject matter connection either.
I realize we are in the midst of difficult deliberations in our current case and that you might well share with our fellow Wing a position on the central claim that I do not share, and that I might well be in the uncomfortable position of being a Tribunal Chair in dissent (although I still hope to persuade you). But no matter. I admire you as an arbitrator and consider that you would be ideally suited to serve as Tribunal President on my new case.
I do not consider that our Fellow Wing’s views about this matter. It is however an appointment we should disclose to the Parties once your nomination is submitted to the ICC.
Hope to be working with you in this new case.
With best wishes

The arbitrator neutrality questions posed by appointment-overlap is a “coming attraction” in an important case approaching its oral argument date (now said to be in January 2023) in the US Court of Appeals for the Eleventh Circuit, on appeal from a judgment of the federal district court in Miami in

    Grupo Unido por el Canal, S.A. v. Autoridad del Canal de Panama

, 2021 WL 5834296 (S.D. Fla. Dec. 9, 2021). The District Court recognized and enforced the final award in a Miami-seated international arbitration, and denied a motion to vacate that award based on the losing party’s contention that it was denied procedural rights protected by the New York Convention due to nondisclosures by two members of the Tribunal, one Wing and the Chair, that (1) during the case, the Chair secured through the Wing another appointment as Chair of a second tribunal in which the Wing was also a Wing; and (2) the Wing was concurrently sitting, on another tribunal, with one of the co-counsel on the winning side of this case, and had sat recently on another tribunal with another one of the winning side co-counsel.

My mission in this Post is not to take you through the Grupo Unido case in detail. It is an enforcement/vacatur case set in the context of overlapping appointments that were unquestionably not disclosed. I believe it is the prevailing best practice among international arbitrators, at least in the North American market, to make some disclosure in both Grupo Unido scenarios (i.e. beginning to sit in in unrelated Case 2 with Tribunal colleague in ongoing Case 1, and sitting (or having recently sat in) Case 2 with counsel in Case 1).

My rant today is about the content of the disclosure in the scenario of a proposed Case 2 with the co-arbitrator in Case 1. And the question I raise is whether, in many instances, disclosure may be so incomplete without violating the confidentiality of Tribunal deliberations in Case 1 that the best practice should be to decline the new appointment.

Still it is worthwhile to review some of the major themes in the appellate briefing in Grupo Unido, as background to consideration of the best practice issue raised here.

Armed with my trusty yellow e-highlighter, I marked two phrases in particular from the Appellants’ brief in Grupo Unido: “structural incentives” and “informed consent.” These are fancy words, so let me explain. “Structural incentives” captures a set of natural and obvious human dynamics in the business relationships among international arbitrators. The first is that we are always grateful for a new appointment, especially a Chair appointment, to the persons responsible for the appointment. The gratitude might be for the compensation potentially to be earned, or the prestige of the new appointment, or the ego gratification, or the thrill of a new intellectual challenge, or a combination of all four. If the gratitude is bestowed by one arbitrator in Case 1 upon another, how should the Parties expect, or fear, that the gratitude will find expression? Perhaps only in a nice dinner and bottle of wine shared after both cases end? But also perhaps — and a party to Case 1 might (reasonably?) fear — by having a certain sympathy toward or flexibility to accept the position taken on the merits by the generous co-arbitrator. Who shall decide whether such natural human instincts affect the impartiality of the arbitrator?

If the new appointment need not even be disclosed, the participating arbitrators decide. In that case, Appellants argue in Grupo Unido, “informed consent” — as the bedrock principle of arbitration — is compromised because the Parties are deprived of the ability even to evaluate whether to raise an objection to the new appointment before it occurs, or to make a challenge in Case 1 if the arbitrator proceeds to accept the new appointment in Case 2 notwithstanding an objection. Case 1 proceeds, in the absence of disclosure, with the Parties having important misconception about the state of intra-Tribunal relations.

Appellee in Grupo Unidos, the prevailing party in the arbitration and in the District Court that enforced the award and rejected the motion to vacate, also states its position convincingly. But while the argument for award enforcement within the framework of the applicable Eleventh Circuit case law is forcefully stated, that argument offers little support for non-disclosure of overlapping appointments as sound or acceptable professional practice. The strands of the argument against award vacatur that might be said also to support non-disclosure as a practice are, more or less, the following: (1) the arbitrator was and is widely-admired and in demand, as indicated by his robust roster of appointments and counsel engagements and his status as leader of the arbitration practice in his well-regarded law firm, (2) his expertise in the technical discipline involved in Case 2 (construction) was a substantial and perhaps decisive factor in his selection, (3) the arbitrator was jointly selected to chair Case 2 by the two co-arbitrators, not only by the co-arbitrator with whom he was sitting in Case 1, and (4) the IBA Rules on Conflict of Interest do not treat overlapping appointments even as an “Orange List” item.

Hmm. Let’s think about this. Starting with the IBA Rules, which say on this subject in the prefatory comment to the Orange List : “While the Guidelines do not require disclosure of the fact that an arbitrator concurrently serves, or has in the past served, on the same Arbitral Tribunal with another member of the tribunal, or with one of the counsel in the current proceedings, an arbitrator should assess on a case-by-case basis whether the fact of having frequently served as co-counsel with, or as an arbitrator on Arbitral Tribunals with, another member of the tribunal may create a perceived imbalance within the tribunal. If the conclusion is ‘yes’, the arbitrator should consider a disclosure.”

That strikes Your Commentator as not such a robust blessing for non-disclosure. Especially because the type of “imbalance” mentioned as a potential downside of “frequent[]” service with the same arbitrator on other tribunals could also arise when there is high frequency of contact in a single case. If one case goes on for five years and entails six partial final awards, 15 contested procedural orders, and 50 hearing days — this is my example, and not knowingly a description of Grupo Unido!- the frequency and intensity of interaction among Tribunal members deserves to be considered as comparable to, for instance, five cases over five-year span that involve less intensive collaboration and contact.

And there is more to digest in the IBA Orange List, because para. 3.3.3 treats as a situation where disclosure ought normally to be made, that “[t]he arbitrator was, within the past three years, a partner of, or otherwise affiliated with, another arbitrator or any of the counsel in the arbitration.” Taking this paragraph in light of the above-quoted statement about overlapping appointments, we can fairly assume that 3.3.3 does not clearly regard an arbitral tribunal as a business partnership or business affiliation among the members. But certainly we are in business together, as we three are earning income from a joint endeavor and from a common payment source. We worry together about the adequacy of deposits for our fees and expenses. We sometimes worry together about whether to suspend a case based on non-payment of deposits, or to forge ahead and bear financial risk. In ICC cases, we worry together about whether the amount in dispute has been fairly stated in the Financial Table; we discuss whether or not to seek interim compensation at key milestones; we worry together about timely issuance of our awards to avoid penalty for tardiness. By these and other measures, we as Tribunal members are in business together.

And if the absence of a clear mandate against disclosure is not evident in the IBA Guidelines, the other factors identified by Appellee in Grupo Unido seem even less convincing. Why should arbitrators of high professional standing and untarnished reputations for integrity have less reason to disclose? To some of us New World types, this perspective grates as a hangover from the 20th Century reign of the self-possessed Francophone Arbitration Empire. It also seems unconvincing to say the Case 2 appointment was driven by the appointee’s technical expertise, when the same expertise could be found in dozens of other capable arbitrators. And the argument that the appointment as Chair in Case 2 is derived from joint nomination with the participation of a non-overlapping Wing in Case 2 seems to ring hollow, as the overlapping Wing may well have been the driving force behind the selection and the parties in Case 1 have good cause to say they should be entitled to consider this as an element of their ongoing informed consent to the procedure in Case 1.

So at least in my neighborhood, where many fairly reputable international arbitrators can be found standing on line to buy smoked salmon on Sunday morning, there is quite a lot of sympathy for disclosure in the context of concurrent overlapping appointments. But I would like return now to the theme of my Dream E Mail: precisely what should be disclosed about the appointment in Case 2 to the Parties in Case 1, and what should the two overlapping appointees do if material information cannot be disclosed due to the confidentiality of Tribunal deliberations? Such inaccessible information includes not only the Tribunal members’ fully- or partially-formed views on key substantive issues in the case, but also details about the relationship dynamics in the Tribunal.

Let’s suppose that the Dream Email scenario culminates in Case 1 Wing X getting the Chair Nomination for new Case 2. And that either Wing X or Chair XX, or both jointly, make a prompt but antiseptic disclosure in Case 1 that Chair XX as Case 2 Wing and Ms. Z as Case 2 Wing have jointly nominated Case 1 Wing X to Chair Case #2? Let’s suppose further that both sides confirm they have no concerns. Are we satisfied that the parties’ rights to an independent and impartial Tribunal have been served?

The argument for “Yes” is, essentially, that the concerns that should have led to disclosure in the Grupo Unido case (according to the Appellant in 11th Cir.) are addressed — that disclosure of the basic facts of the new appointment fully puts on the table for the parties’ consideration the obvious sources of potential bias: gratitude for a lucrative new gig, a new platform for “truncated Tribunal” coalition-building in Case #1 away from the other Wing, and a possibly perverse cross-incentive to align in Case #1 as an incubator of goodwill in Case #2.

Such basic facts disclosure should suffice, the argument goes, to allow the Parties to assess whether they have confidence that their arbitrators are above allowing such factors to influence their judgment (or that, all things considered, they are willing to bear the risk of dysfunction).

But the argument for “No” – the argument that such basic facts disclosure falls short – is that the parties are not in a good position to evaluate because they know little or nothing about the internal workings of the Tribunal in Case 1. They do not and cannot know more, because the deliberations of the Tribunal are confidential, and ethical canons constraining arbitrators to respect that confidentiality provide no exception for the type of situation depicted here. Are the newly-conjoined arbitrators to be acquitted on charges of partial disclosure because they have disclosed up to the ethical limit imposed by deliberations confidentiality? Perhaps not, because they have an obvious escape from the ethical trap: to Just Say No (politely and with thanks for the offer) to the new appointment. The parties simply cannot be put in a sufficiently informed position to seriously evaluate whether Chair XX in Case 1 might, explicitly or otherwise, seek to redeem an IOU at crunch time in Case 1 and whether Wing X might consciously or unconsciously submit to such influence. By Just Saying No, the offeree of the overlapping appointment spares the parties from making a difficult and uninformed decision.

I will not go so far as to say that Just Say No is trending as a best practice among leading arbitrators who often face this issue. But there are indeed some leading arbitrators who will decline to even to be considered for overlapping appointment driven by a nomination in which a colleague in Case 1 is a participant, even when overlapping Case 1 is in its infancy and alignment within the Tribunal on important procedural and substantive issues is months or years into the future, but is a foreseeable issue of discomfort in an overlapping tribunal setting.

If you encounter any of these arbitrators on the smoked salmon line, ask them where they stand on this question. Some best practices evolution in this area would certainly be welcome.

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