What Factors Should be Considered When Choosing an Arbitrator?

Arbitration is an increasingly popular method of dispute resolution because it puts clients in the driver’s seat. Unlike domestic litigation, where the parties have virtually no control over the assignment of the judge who presides over their case, arbitration allows the parties to play a key role in selecting the ultimate decision-makers in the dispute. Parties can propose and agree on a single arbitrator or, in the case of a three-member tribunal, each party typically nominates an arbitrator and then the two party-appointed arbitrators, or the parties themselves, choose a presiding arbitrator.

While the ability to select the decision makers is a distinct advantage of arbitration, it is also a process with high stakes. The appropriate selection of an arbitrator can make or break the outcome of an arbitration. Once the arbitrators are appointed the parties have limited recourse for disqualifying arbitrators. Accordingly, with so much on the line, here are 7 factors that every party should consider when selecting an arbitrator in international arbitration.

1. Selection Process in Arbitration Agreement

When beginning the search for an arbitrator, parties should start by reviewing the text of the arbitration agreement (if one exists). The included provisions are important for two principal reasons.

First, an arbitration agreement is first and foremost a contract between parties on how to resolve a dispute should one arise. Accordingly, deviations from the procedural stipulations in the agreement may lead to annulment of the award. Indeed, one of the grounds for annulment under both Article V of the New York Convention and Article 34 of the UNCITRAL Model Law is that the composition of the arbitral tribunal was not in accordance with the agreement of the parties.

Second, arbitration agreements often provide that the arbitrator will be chosen through an arbitration institution’s process, such as the American Arbitration Association (“AAA”), or the AAA’s international arm, the International Centre for Dispute Resolution (“ICDR”), or the International Centre for Settlement of Investment Disputes (“ICSID”), and that the arbitrations will follow that institution’s rules of arbitration. In instances such as these, parties are not only provided with a clearer picture of the formal boundaries of the arbitration (e.g., single arbitrator vs. panel of arbitrators, usage of specific arbitrator rosters), but also with the informal tendencies of the arbitral institution selected to govern the arbitration.

2. Procedural Experience

As a legal mechanism, arbitration shares numerous similarities with traditional court cases, yet when it comes to the topic of procedure the two processes diverge. Where a classic court case is structured around rigidity and uniformity, arbitration is designed to bring about flexibility and creativity in dispute resolution. Such characteristics in arbitration incentivize parties to select arbitrators that have both a mindset geared towards fairness and versatility and a resume that demonstrates experience dealing with the unique procedural aspects of arbitrations.

a. Strong Management Skills

The absence of rigid procedural rules of arbitration can produce prompt and efficient arbitral proceedings, but if not managed appropriately that same absence can lead to prolonged procedural disputes between parties. These lengthy disagreements can cause delay and, ultimately, unnecessarily increase the costs of arbitration. In cases involving a sole arbitrator, or when choosing the president of a three-member panel, the parties should choose someone who not only possesses experience with the arbitral process, but also is able to expertly manage people and their personalities. In arbitrations with a three-member panel the parties should also consider the arbitrator’s experience working on a panel with others. To evaluate a potential arbitrator’s management skills, parties can look at how swiftly that arbitrator has reached decisions in prior cases and their familiarity with presiding over disputes involving a wide array of cultures, subject areas and legal systems.

b. Open Mindset

In order to take full advantage of the flexibility that arbitration offers, parties should select arbitrators that are impartial and do not favor one party over the other. In international arbitration – unlike in certain domestic arbitrations – there are no non-neutral arbitrator nominees. In fact, lack of impartiality on the part of an arbitrator is grounds for challenging that arbitrator’s appointment in international arbitration. Article 12 of the UNCITRAL Model Law provides that an arbitrator’s appointment may be challenged if there are “justifiable doubts as to his [or her] impartiality or independence.” Even if a biased arbitrator appointment is not formally challenged, it can often backfire. Often, the other arbitrators on a panel will recognize the arbitrator’s bias and, as a result, not respect his or her opinions or contributions, which ultimately disadvantages the appointing party. It is, therefore, in both parties’ interests to nominate neutral and impartial arbitrators. Neutral arbitrators are also more likely to embrace an approach rooted in fairness that allows each party to evenly present their case and derive an outcome that is a balance of the parties’ interests, where warranted.

3. Substantive Experience

Disputes referred to arbitration are frequently defined by legal issues unique to particular industries and their corresponding areas of law. As such, it follows that the best arbitrators to preside over an issue would be those with the legal and technical expertise that match the nature of the dispute. Selecting a candidate already familiar with the subject-matter of the controversy provides the distinct advantages of efficiency and clarity. Parties can spend less time explaining industry concepts and focus on the specific legal issues present in the case. Arbitrators will also be able to more substantively engage in the arguments of the proceedings and more quickly reach fair and clear decisions. To aid with this selection process, institutional providers, such as AAA/ICDR or JAMS, provide parties with a cumulative roster of arbitrators that is often subdivided based on industry (for example, patent, oil and gas, construction or employment disputes). This provides parties with a valuable opportunity to survey the landscape of potential arbitrators and weigh their suitability for the upcoming arbitration proceedings.

One cautionary note: arbitrators with industry expertise may hold strong views on that industry and corresponding area of law. Thus, when selecting an arbitrator with industry expertise, a party should not only review the candidate’s professional resume but also look to prior decisions, news articles, and interviews with the candidate to determine whether they hold views that may disadvantage the party in the arbitration.

4. Diversity

The case for diversity has been made in nearly every industry, of which arbitration is no exception. In arbitration, diversity amongst arbitrators and counsel provides for varied perspectives and ultimately improves the quality of the decision-making process at play.

a. Cultural Diversity

One of the immediate benefits of culturally diverse arbitral panels is a reduction in negatively associated “groupthink”. By having arbitrators familiar with cultural nuances, arbitration panels are better positioned to deliver a well-thought-out decision that is not guided by tradition but rather is responsive to the socio-political factors that underly a dispute. Additionally, it is important to remember that cultural diversity does not just apply to race, ethnicity, or language, it also extends to gender, age, and professional industry. Increasing diversity among arbitrators also serves to improve legitimacy in the eyes of various stakeholders as it relates to the cultural competency of arbitration panels. And by doing so, increases confidence overall in arbitration decisions, which leads to a deeper commitment by existing and future parties to comply with arbitral awards.

b. Nationality Restrictions

While parties are generally free to choose their arbitrators, under the arbitration rules of many institutions (including UNCITRAL, LCIA and ICC), the sole arbitrator or chairperson cannot have the same nationality as that of one of the parties. This rule of “neutral nationality” is designed to achieve the tenets of fairness and impartiality by removing one significant source of potential bias. For example, in a dispute between a US company and a French company, the sole arbitrator has to be of a nationality other than American or French, unless the parties agree otherwise.

5. Availability

With efficiency as a stated advantage of arbitration over litigation, parties choosing arbitrators are well-advised to consider the status of each candidate’s current caseload. It is all too common for well-known arbitrators to be highly sought after and consequently have caseloads that are booked for months or even years in advance, which may significantly delay proceedings.

Tactically, there may be reasons a party wishes to have a case resolved quickly versus a more protracted timeline. Thus, in order to best strategize and avoid situational surprises, parties should question prospective arbitrators on both their known and likely upcoming commitments. Recently, some arbitral institutions, such as the ICC, have begun a practice of requiring arbitrators to indicate their availability prior to an appointment and providing that information to the parties. Once known, each party will be in a better position to evaluate a candidate’s suitably to their goals and move them up or down their ranking list accordingly.

6. Due Diligence

After identifying potential candidates to serve as arbitrators based on the criteria discussed above, the next and possibly most critical step a party can take in selecting an arbitrator is to conduct due diligence.

a. Conducting due diligence

Where an institutional provider is administering a case, it may provide the parties with a list of arbitrators accompanied by a copy of each arbitrator’s CV or biography for review. It is vital that counsel for the parties carefully examine every piece of information provided in a prospective candidate’s folder.

In addition, irrespective of any information provided by the institution, counsel should conduct an independent investigation that thoroughly inspects every piece of publicly available and verifiable information about the prospective arbitrators. Here, the investigation should make use of any available decisions issued by the candidates, videos of candidates giving interviews or speaking at conferences on related subject-matter, and published writings they have authored. Once all relevant publicly available material has been reviewed, parties may turn to privately held sources of information. For example, speaking to others who have gone before the candidate in arbitration can prove useful in understanding the candidates’ demeanor and management style.

b. Ex parte pre-appointment interviews

Factors such as an arbitrator’s independence, impartiality, willingness to serve, and case management skills are paramount in the selection process of a qualified arbitrator. But these elements are difficult to assess through third parties. Accordingly, unless expressly prohibited by the governing arbitration clause or rules, parties are permitted to have limited ex-parte communications with potential arbitrators to discuss their knowledge and suitability firsthand. Importantly, such communications must be narrowly tailored to the appointment process and avoid any discussion about the substance or merits of the case. To avoid later suggestions of impropriety, the Chartered Institute for Arbitrators (“CIARB”)’s Practice Guidelines encourage potential arbitrators to take contemporaneous notes during these interview. In addition to being useful in filtering out potential arbitrators, pre-appointment interviews can also assist parties in assessing an arbitrator’s familiarity with the other party-appointed arbitrator and glean his or her views on potential candidates for president of the arbitral panel.

7. Disclosures and Disqualification

Once an arbitrator or panel of arbitrators has been selected or appointed, they are required to disclose any financial, professional, social, or otherwise important relationship with any of the entities or persons involved with the case. Upon review, should any information arise which creates a potential conflict of interest or casts doubt on the independence and fairness of an arbitrator, either of the parties may object to that candidate’s appointment. Time is of the essence, however, because many arbitration rules provide for a limited time period during which a party may object to an appointment of an arbitrator after such information becomes known. The disclosure process is essential to the arbitrator selection process because it often presents parties with the final opportunity to consider the appropriateness of an arbitrator prior to final selection.