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Conference on Rules for Institutional Arbitration and Mediation

20 January 1995, Geneva, Switzerland

 

Constituting the Arbitral Tribunal
by Albert Jan van den Berg
Stibbe, Simont, Monahan, Duhot, Amsterdam; Vice-President, NAI


Principles Governing the Composition and Establishment of the Arbitral Tribunal

The provisions in arbitration rules governing the appointment of the arbitral tribunal are of crucial importance to the success of an arbitration. These provisions determine the respective roles of the parties and the administering institution in the selection of the arbitrator or arbitrators, and should provide solutions for dealing with potential delay caused both by deliberate attempts to slow the process and by accidental occurrences that could, if not managed, lengthen the process unnecessarily.

The provisions in the WIPO Arbitration Rules governing the appointment of the arbitral tribunal are based on three general, underlying principles.

First, the WIPO Arbitration Rules give precedence to the agreement of the parties on the number of arbitrators and the procedure for their appointment (see Articles 14(a) and 15(a)). In most cases, it is advisable to agree on three arbitrators and to use the procedure for appointment that is set out in the governing Rules. Therefore, it is advisable that the recommended WIPO Arbitration clause be used, making provision in it for three arbitrators.

Secondly, the WIPO Arbitration Rules perform the supplementary function of coming to the rescue and providing a solution in three situations, which could produce impasses: where there is no agreement on a particular issue between the parties, where there is such an agreement but it is defective, and where there is such an agreement but it is not carried out as envisaged (see Articles 14(b) and 15(d)). During the process of the establishment of the arbitral tribunal, the WIPO Arbitration Center plays a role only in the determination of the number of arbitrators where the parties have not agreed on the number (see Article 14(b)), and in "default appointments" (see Article 19), which are made by the Center in certain circumstances where the procedure for appointment envisaged by the parties or the Rules has not been carried out within the applicable time period.

The third principle is that Articles 14 to 36 of the WIPO Arbitration Rules, which contain the provisions governing the composition and establishment of the arbitral tribunal, attempt to be exhaustive and to cover all possible cases. They may appear to be somewhat detailed. In practice, however, the appointment process will usually be simple, except perhaps where multiple claimants or respondents are involved, a situation which is by its nature complicated and for which correspondingly complicated provisions were required in the Rules. Articles 14 to 36 are modelled after, in particular, the UNCITRAL Arbitration Rules and the Arbitration Rules of the Netherlands Arbitration Institute ("the NAI Rules"). They also contain, however, a number of novel provisions relating to appointments in the case of multiple claimants or respondents (article 18), communications between parties and candidates for appointment (Article 21), the availability of arbitrators (Article 23(a)) and truncated tribunals (Article 35), which are mentioned in more detail below.

 

The Determination of the Number of Arbitrators

The first question that arises in the appointment process is, of course, the question of how many arbitrators there will be. The Chart in Annex I, sets out the manner in which this questions is determined under the WIPO Arbitration Rules.

It is first necessary to ascertain whether the parties have agreed on a number. If so, Article 14(a) provides for the tribunal to consist of the numbers of arbitrators so agreed by the parties. Parties are free to agree on any number of arbitrators, although they must exercise case in ensuring that the number they choose is permitted under the law of the place of arbitration. There are jurisdictions where an uneven number of arbitrators is a mandatory requirement. As a matter of practice, the number most frequently chosen is one or three, with three being the preference most often expressed in international arbitrations.

If there is no agreement between the parties as to the number of arbitrators, the number is determined by the Center. The basic principle, in this regard, is set out in Article 14(b), which provides for a sole arbitrator, unless the Center determines that, in view of all the circumstances of the case, a tribunal composed of three members is appropriate. The ICC has a somewhat similar system. The practice rule used in this respect by the ICC is to specify three arbitrators for claims over 1 million dollars.

 

Appointment of a Sole Arbitrator

The procedure applicable for the appointment of a sole arbitrator under the WIPO Arbitration Rules is represented in the Chart in Annex II.

Where the parties have, in their arbitration clause or submission agreement, agreed on a specific procedure for the appointment of the sole arbitrator, Article 15(a) requires that procedure to be followed. That procedure may not, however, produce a result within the time limit allowed in the parties’ agreement. In this case, the Rules provide for the Center to make the appointment of the sole arbitrator. Similarly, the Rules provide for the Center to make the appointment where the parties’ agreement does not provide any time limit, but the specific procedure for appointment designated by the parties does not produce a result within 45 days after the commencement of the arbitration (Article 15(b)). In either of these cases, the appointment is made by the Center pursuant to the list procedure, which is discussed below.

If the parties have not agreed on a specific procedure, the Rules provide for the appointment of the sole arbitrator to be made jointly by the parties (Article 16(a)). Again, in the interest of ensuring that the arbitration gets underway expeditiously, a time limit is provided in the Rules -- 30 days after the commencement of the arbitration -- within which the parties must exercise their joint right of appointment. If the appointment of the sole arbitration is not made within that time period, the appointment is again made by the Center pursuant to the list procedure.

 

The Appointment of Three Arbitrators: The Standard Case

What may be called the standard case for the appointment of arbitrators, because it is likely to occur in most cases, is the case in which the recommended WIPO arbitration clause or submission agreement is used and it is specified in that clause or agreement that there should be three arbitrators. If that course of action is followed, the appointment of the arbitrators is regulated by Article 17 of the WIPO Arbitration Rules. The Procedure for appointment in such cases is represented in the Chart in Annex III.

The procedure for the standard case provides for the first arbitrator to be appointed by the claimant in the Request for Arbitration. The policy choice was thus made by the drafters of the Rules that the claimant should make its appointment without knowing the identity of the arbitrator to be appointed by the respondent. The second arbitrator must be appointed by the respondent within 30 days after receipt of the Request for Arbitration. The two party-appointed arbitrators must then appoint the presiding arbitrator within a period of 20 days after the appointment of the second arbitrator.

What if something goes wrong in the execution of the procedure envisaged for the standard case? Two situations are to be distinguished. The first is where either the claimant or the respondent does not exercise its right to appoint an arbitrator within the required period of time (in the Request for Arbitration or within 30 days from the date of its receipt by the respondent, respectively). In these cases, the appointment of the arbitrator is made by the Center directly, that is, without the use of the list procedure. Since the Center is, in these circumstances, exercising by a default a right attaching to each of the parties individually, the list procedure, which involves the participation of both parties, is not considered to be appropriate.

The second situation of default occurs where the two party-appointed arbitrators (or the arbitrators appointed by the Center failing the exercise of the right of appointment by either or both of the parties in due time) fail to appoint the presiding arbitrator within the required time period. In this case, the presiding arbitrator is appointed by the Center, on the basis of the list procedure (Articles 17(d) and 19(b)).

 

The Appointment of Three Arbitrators: All Possible Cases

The Chart in Annex IV covers the procedure for the appointment of the three arbitrators in all possible cases. The Chart appears to be complicated, because it incorporates within it the Chart in Annex III (covering the procedure for the appointment of three arbitrators in the standard case) and, therefore, contains considerable detail.

Two additional situations to the standard case for the appointment of three arbitrators are covered in the Chart in Annex IV. The first of those is the situation which may occur when the parties have not agreed on the number of arbitrators. Here, as mentioned above, the determination of the number is made by the Center. The ordinary principle applied by the Center is to appoint a sole arbitrator, but the Center has a discretion to appoint three arbitrators where this is appropriate in all the circumstances of a case. Where the Center exercises its discretion to appoint three arbitrators, the procedure for the standard case for the appointment of three arbitrators can no longer apply, since that procedure requires the claimant to appoint an arbitrator in the Request for Arbitration, a stage by definition prior to the exercise of the Center’s discretion to designate three arbitrators. Accordingly, Article 17 (c) modifies the standard procedure for the appointment of three arbitrators and provides for the claimant to make its appointment not in the Request for Arbitration, but within 15 days after receipt by it of notification by the Center that the tribunal is to be composed of three arbitrators. Thereafter, the procedure follows its normal course, that is, the respondent must make its appointment within 30 days after receipt of the Center’s notification that the tribunal is to be composed of three arbitrators, and the two arbitrators appointed by the parties must appoint the presiding arbitrator within 20 days after the appointment of the second arbitrator.

The default provisions for the situation where a three-member tribunal is to be constituted as a result of the exercise by the Center of its discretion on number are the same as those applying in the standard case for the appointment of three arbitrators. Where a party fails to make its appointment within the required time period, the appointment is made directly by the Center. Where the presiding arbitrator is not appointed within the required time limit, the Center appoints the presiding arbitrator on the basis of the list procedure.

The second situation in which there will be a deviation from the standard case for the appointment of three arbitrators is where the parties have agreed themselves on the procedure for appointment. By virtue of Article 15(a), that procedure must be followed. If the procedure does not produce a result within the time specified in the parties’ agreement or, in the absence of such a specified time period, within 45 days after the commencement of the arbitration, the missing appointment is made by the Center. Again, if the missing appointment is that of an arbitrator that was to have been appointed by one party, the appointment is made directly by the Center, whereas, if the missing appointment is that of the presiding arbitrator, the Center makes the appointment pursuant to the list procedure.

 

The List Procedure

The list procedure is used whenever the WIPO Arbitration Center is called upon to make a default appointment of a sole or presiding arbitrator. The procedure is designed to allow the participation of the parties in the process of appointing the sole or presiding arbitrator and a certain influence on their part in the actual appointment. For that reason, its use is confined to appointments of the sole or presiding arbitrator, and it is not used in the case of appointments made by the Center of an arbitrator when the Center makes the appointment in lieu of a party which has failed to exercise its right of appointment within the allotted period of time.

In addition to the advantage of party involvement, or, perhaps, because of the involvement of both parties, the list procedure eliminates what may be called the "burning factor". The burning factor is a rather frequently encountered phenomenon of the automatic rejection of the name of a candidate for the mere reason that the suggestion of the name originated from the other party. Where a name suggested by one party is rejected automatically by the other party, this may lead to a situation of continuous rejections, each party rejecting the other’s suggestions, not for substantive reasons, but simply because the name came from what is regarded by each party as a suspect source.

In the case of the list procedure, the proposal of the sole or presiding arbitrator does not originate from one of the parties, but from the WIPO Arbitration Center. The mechanism is straightforward. The first step is the determination by the Center whether, in a given case, the list procedure is appropriate, a determination that is worded as an exception, at the end of Article 19(c). While that determination is an exception, it is shown in the Chart in Annex V as the first step because, logically, this question must first of all be addressed by the Center. If the Center determines that, for certain reasons, the list procedure is not appropriate in the case in question, the presiding or sole arbitrator is appointed directly.

If the Center determines that an exception should not be made, the list procedure applies as described in paragraph (b) of Article 19. The Center draws up a list containing at least three names, as well as the biographical details of the person so named, and sends it to each party. Each party has the right to delete names from the list and must number the remaining names in order of preference. Deletion, of course, should occur only in cases of major objections by party.

The marked-up lists are then returned to the Center by each party. In most cases, it may be expected that the parties will not consult each other on the lists. Consultation does occur sometimes, but, usually, each party considers the list independently.

Upon receipt of the marked-up lists by the Center, the Center compares the lists and, on the basis of the preferences expressed by the parties, appoints the sole or presiding arbitrator.

It is possible that one party deletes all the names from a list, or deletes certain of the names while the other party deletes the remainder. Practice indicates, however, that this is infrequently the case. The Netherlands Arbitration Institute, for example, uses the list procedure and its experience indicates that, in 80% of the cases, the preferences expressed by the parties are the same. The high success rate seems to be explained simply by reason of the fact that each side does not know what the other is doing. A certain objectivity thus enters into the parties’ consideration.

It may happen that the list procedure does not lead to an appointment. It may be that the lists do not reveal a person acceptable to both parties, or that a person acceptable to the parties is not able or does not wish to accept the appointment, and there are no other eligible persons on the lists. It may also be that a conflict of interest becomes evident in respect of an otherwise acceptable candidate. In any of these cases, the appointment is then made directly by the Center.

 

Multiple Claimants or Multiple Respondents

Article 18 of the WIPO Arbitration Rules is addressed to the situation of the appointment of three arbitrators in the case of multiple claimants or multiple respondents. The Article deals only with the appointment of three arbitrators, since the circumstance of multiple claimants or multiple respondents does not raise special problems where a sole arbitrator is to be appointed. In the case of a sole arbitrator, by virtue of Article 16(a), the sole arbitrator is to be appointed by the parties (assuming that they have not agreed on a different procedure of appointment), and the agreement of all claimants and respondents is thus necessary.

In contrast, where three arbitrators are to be appointed, the question arises as to how more than one claimant, or more than one respondent, should be accommodated in the process of nominating the party-appointed arbitrator. The approach adopted to that question must now take into account the decision of the Cour de Cassation of France of January 7, 1992, in Dutco v. BKMI in France, and possibly in other countries.

In the Dutco case, there was one claimant and two respondents in an ICC arbitration. The claimant appointed its arbitrator, and the ICC instructed the two respondents to appoint jointly one arbitrator. The two respondents took the view that each had different interests and that, therefore, each was entitled to appoint its own arbitrator. Since, under the ICC system, it is possible to have only three arbitrators (two party-appointed arbitrators and one presiding arbitrator), the ICC maintained its position that the respondents should together appoint one arbitrator. The respondents proceeded to make the required appointment under protest, and then challenged the arbitral award, after it had been made, on the basis that the arbitral tribunal had been irregularly constituted.

The Cour de Cassation held that equality between the parties to an arbitration must be respected in the appointment process and that, in this case, the principle of equality required that each party have the same rights in appointing an arbitrator. Furthermore, the Court held that the right to equal treatment could only be renounced by the parties after the dispute had arisen.

Article 18 of the WIPO Arbitration Rules seeks to accommodate the decision in the Dutco case by re-establishing, where necessary, the principle of equality of the parties in the appointment process. Article 18 is divided into three paragraphs. Each paragraph, as mentioned, concerns the situation where three arbitrators are to be appointed. Paragraphs (a) and (b) relate to circumstances in which the parties have not agreed on a procedure of appointment, whereas paragraph (c) relates to the situation where the parties have so agreed on a procedure of appointment. The situation of parties not having agreed on a procedure of appointment (that is, the situation dealt with in paragraphs (a) and (b)) is further divided into two cases -- first, the case of multiple claimants, which is treated in paragraph (a), and, secondly, the case of multiple respondents, which is treated in paragraph (b).

The Chart in Annex VI describes the steps involved in the appointment process where there are multiple claimants. The Chart appears somewhat complicated, but is so only because it seeks to cover comprehensively all the steps involved where there are multiple claimants. Logically, the first question that needs to be addressed is whether there is an agreement by the parties on the procedure of appointment of three arbitrators. If there is no such agreement, then paragraph (a) requires the claimants to appoint jointly an arbitrator. They must do so either in the Request for Arbitration, where the arbitration agreement has specified three arbitrators, or within 15 days after notification by the Center that three arbitrators are to be appointed, where the number of three arbitrators is determined by the Center (see Article 14(b) and the discussion above). If the Claimants fail to exercise their joint right of appointment, the appointment is made directly by the Center.

The procedure for appointment in the case of multiple respondents is described in the Chart in Annex VII. This is the situation that was dealt with in the Dutco case and which is addressed in Article 18(b). Where there are multiple respondents, Article 18(b) provides for the respondents to appoint jointly an arbitrator either within 30 days after receipt of the Request for Arbitration, where the arbitration agreement has specified that there are to be three arbitrators appointed, or within 30 days after notification by the Center that three arbitrators are to be appointed, where the number of three arbitrators is determined by the Center. The innovation introduced by Article 18(b), which is directed at the decision in the Dutco case, operates if the respondents fail to appoint jointly an arbitrator within the applicable time limit. In this case, if the claimant or claimants have already appointed an arbitrator, the requirement of equality of treatment as defined by the Court in the Dutco case would not be respected if the Center were simply to proceed to appoint an arbitrator for the respondents. In order to accommodate the requirement of equality, Article 18(b) therefore provides that any appointment that has been made by the claimant or claimants shall be void, and that both the arbitrator to be appointed by the claimant and the arbitrator by the respondents shall be appointed by the Center. Thereafter, the two arbitrators so appointed proceed in the normal manner to appoint the presiding arbitrator.

As mentioned above, paragraph (c) of Article 18 deals with the situation where the parties have agreed in the arbitration agreement on a procedure for the appointment of three arbitrators. In order to ensure that the principle of equality is respected, paragraph (c) provides that the appointment process required by paragraphs (a) and (b) of Article 18 shall apply, regardless of the agreement of the parties, unless the agreement of the parties have expressly excluded the application of Article 18.

* * * *

The description of appointment in the case of multiple claimants or multiple respondents completes the description of the provisions in the WIPO Arbitration Rules on the appointment of the arbitral tribunal. A number of other provisions are contained in those Rules pertaining to the constitution of the arbitral tribunal, which can be dealt with briefly.

 

Nationality of Arbitrators

Article 20 of the WIPO Arbitration Rules concerns the nationality of arbitrators. The provisions of the Article are straightforward and, in paragraph (b), are directed at ensuring the neutrality of the national affiliations of the sole or presiding arbitrator.

Care should be exercised in designating any specific nationality requirement in an arbitration agreement, since it may be that, in certain cases and in certain jurisdictions, there may not be a sufficient number of appropriately qualified arbitrators available.

 

Impartiality and Independence of Arbitrators

Articles 21 and 22 establish rules concerning the impartiality and independence of the arbitrators.

Article 22 is self-evident and contains the well-known rules concerning the disclosure by prospective arbitrators of circumstances that might give rise to justifiable doubt as to the arbitrator’s impartiality or independence.

Article 21 is a novel provision. It deals with the increasingly frequent phenomenon of the "beauty parade." The beauty parade is already well known amongst law firms. It consists of the review by a potential client of the proposed services of a number of competing law firms in relation to a particular project, with a view to enabling the potential client to choose what it considers to be the most promising offer of services. The same practice is occurring, in a somewhat more discrete way, with prospective arbitrators. The party which has to appoint an arbitrator draws up a short list of possible candidates and seeks to interview each of those candidates before taking a final decision. Such a practice creates a delicate situation, which must be handled with great care by all concerned. Article 21 recognizes the delicacy of this practice and lays down rules as to what may or may not be said.

As a practical matter, I would suggest that, in all cases where a person is approached as a prospective arbitrator to participate in such an interview, the person make a note to file of the interview so that he or she is ready for disclosure, if and when appointed, to the other party and the other arbitrators. In this way, there is an assurance of certainty as to what has been discussed during the interview.

 

Challenge of Arbitrators

Articles 24 to 29 deal with the challenge of an arbitrator. The provisions are in standard form and commentary on them can be limited to three points.

First, challenges are decided by the WIPO Arbitration Center (Article 29) in accordance with its internal procedures. Those internal procedures envisage that the ruling on a challenge will be given by an ad hoc committee of three persons drawn from the WIPO Arbitration Consultative Commission.

Secondly, the time limit for making challenges is always an important matter. It is contained Article 25, which requires challenges to be made within 15 days after notification of the arbitrator’s appointment or after becoming aware the circumstances on which the challenge is based.

Thirdly, Article 28 contains a useful face-saving device. If an arbitrator is challenged, and if the other party agrees to the challenge or the arbitrator withdraws voluntarily, the arbitrator is replaced "without any implication that the grounds for the challenge are valid."

 

Pleas as to the Jurisdiction of the Tribunal

Article 36 deals with the manner in which pleas as to the jurisdiction of the tribunal are to be treated. It provides, in paragraph (a), for the tribunal to have power to hear and determine objections to its own jurisdiction, including any objections with respect to the arbitration agreement. Paragraph (b) contains the usual rule that the tribunal has power to determine the existence or validity of any contract of which the arbitration agreement forms part or to which it relates.

Those wishing to raise pleas as to the jurisdiction of a tribunal need to exercise care in relation to the time at which such pleas are raised. In this respect, paragraph (c) of Article 36 provides that, in principle, such pleas may be raised in limine litis only.

Paragraph (e) of Article 36 contains a useful provision immunizing the Center from pleas as to the jurisdiction of a tribunal. It provides that the Center may continue the administration of an arbitration notwithstanding such a plea.

 

Truncated Tribunal

Article 35 is modelled after Article 14 of the International Arbitration Rules of the American Arbitration Association and is directed at overcoming attempts to sabotage an arbitration at a mature stage of the proceedings. It may happen that one of the party-appointed arbitrators, after extensive deliberations have already taken place and the end is nearing, perceives that the party that has appointed him or her will probably lose. The arbitrator may indulge in a variety of sabotage ploys, including failing to appear at hearings or meetings or, more subtly, failing to appear at every third or fourth hearing or meeting.

In these types of situations, it becomes difficult for the remaining arbitrators to decide whether they should ask for the removal of the defaulting arbitrator, or whether they have the power to continue in the absence of that arbitrator. Article 35 seeks to remedy the situation by enabling the other arbitrators to proceed with the arbitration and to render an award. Alternatively, paragraph (b) of Article 35 envisages the appointment of a substitute by the Center or where the two other arbitrators determine not to continue the arbitration without the participation of a third arbitrator.

It is to be noted that the provisions of Article 35 are very detailed, with a view to ensuring that the determination to continue the arbitration in the absence of the arbitrator who is failing to participate in the work of a tribunal is not made lightly.

 

Availability, Acceptance and Notification

Article 23 deals with the acceptance of appointment by an arbitrator and the notification by the Center to the parties of the establishment of a tribunal. Paragraph (a) of Article 23 contains a novel provision directed at those arbitrators who have too many cases but who cannot resist the honor of being invited to act as arbitrator in yet another case. It deems each arbitrator, by accepting appointment, to have undertaken to make available sufficient time to enable the arbitration to be conducted and completed expeditiously.

Annex 1: Number of Arbitrators
Annex 2: Appointment of Sole Arbitrator
Annex3: Constitution of Arbitral Tribunal - Standard Case
Annex 4: Appointment of Three Arbitrators - All Possible Cases
Annex 5: List Procedure - For Appointment of Presiding or Sole Arbitrator
Annex 6: Appointment of Three Arbitrators - Multiple Claimants + One Respondent
Annex 7: Appointment of Three Arbitrators - One (or Multiple) Claimant(s) + Multiple Respondents

Commentary - François Knoepfler

Commentary - Eric Schwartz

Discussion

 

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