Jurisdiction - Hong Kong
Reports and Analysis
Asia Pacific – The Beguiling Party-Appointed Arbitrator.

12 November, 2012

 

One of the key features of arbitration is party autonomy, but this should not put the integrity of the arbitral award at risk.

 

 

Party appointment of arbitrators has long been debated in the legal and business arenas as there are ethical concerns surrounding the subject. It is permitted under guidance by various institutions and, in general, the legal and business community feel it is an integral benefit of arbitration over litigation. 

“It’s one of the important elements why people choose arbitration … You cannot choose judges in litigation,” said Hui-ling Chen of Winkler Partners one of the delegates at the ADR in Asia conference. 

If institutional appointment of arbitrators were to become mandatory, many advocates consider that one of the greatest benefits of arbitration over litigation would be lost.

“If we get rid of party-appointed arbitrators, we may be getting rid of one of the sacred tenets of arbitration,” said panellist John Rhie, a partner at Kim & Chang.
Rhie later explained that in certain countries, including South Korea, arbitration is the fairest way to resolve a dispute. An arbitrator can be appointed by a party on the basis that they have relevant industry expertise as well as cultural knowledge. This helps ensure parties are on an even footing. 

In the international context, whether arbitrators should be interviewed pre-appointment by one or both parties also sparks debate. A recent study carried out by Queen Mary, University of London, demonstrated overwhelming support for pre-appointment interviews. Only 12% of respondents said interviewing is inappropriate.
Peter Chow, panellist and partner at Squire Sanders, stated that in the party appointment context, arbitrators should never be appointed without counsel first having interviewed them.

“Experienced arbitrators should politely decline to answer questions on merits. One particular arbitrator told me he found it insulting [that he was asked about the merits of the case] and might have held it against the party,” he said.

Chow went on to advise that counsel should check for any conflict of interest and discuss fees, but, most importantly, they should ascertain the arbitrator’s suitability for the case and ensure they have the requisite industry expertise.

The fundamental concern about arbitrators appointed by parties rather than an institution is whether they are able to be completely objective and impartial. Since an arbitrator will usually be chosen by the legal team on the basis that they are the best choice for their client, the concern is there may be a degree of bias towards that particular party.

Based on the panel discussions, the overwhelming feeling on this issue appears to be that party autonomy is a significant asset to arbitration. If party appointment of arbitrators is abolished, arbitration may lose much of its popularity.

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