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    05:29 PM Mahdev Mohan (Assistant Professor, Singapore Management University) and Siraj Shaik Aziz (Research Associate, Singapore Management University)

    A Quest for Ethical Regulation in Arbitration

        

    Introduction

    On 10 October 2017, members of the Singapore Institute of Arbitrators Working Group, comprising Mr Chan Leng Sun S.C, Mr. Mohan Pillay, Mr. Rian Matthews and Ms. Adriana Uson Ong (“the Working Group”), presented their draft Guidelines on Party Representative Ethics (“Draft SIArb Guidelines”) to SIArb members and Mr Gary Born, President of the Singapore International Arbitration Centre Court of Arbitration, in the course of a public seminar and consultation. 

    The Draft SIArb Guidelines appear to be a response to a growing movement to further regulate unethical conduct in arbitration, and, as a corollary, the broader question of the extent to which ethical rules or standards in arbitration should be harmonised across the global arbitration community.

     

    Ethics for Arbitrators

    Mr Born first queried whether professional ethical, disciplinary standards for lawyers is a useful comparator to those that should apply to arbitrators. He noted that existing rules, such as the United Nations Commission on International Trade Law’s Code of Ethics for Arbitrators in International Commercial Arbitration (“UNCITRAL Arbitrator Code”) and the International Bar Association (“IBA”) Guidelines on Conflicts of Interest in International Commercial Arbitration, do not address ethics per se, but rather independence and impartiality. Such rules do not purport to censure lawyers’ conduct, let alone arbitrators. He prefers to view existing safeguards against unethical conduct as express or implied contractual obligations that emanate from the arbitration agreement or the laws of the arbitral seat, rather than unenforceable ethical guidelines.

    A breach of these contractual obligations would precipitate a challenge of the impugned award. However, he conceded that a contractual breach does not lead to the sanction the arbitrator in question. Mr Born posed a question to the audience; namely, whether the SIAC should be given the disciplinary authority to remove arbitrators for misconduct. He acknowledged that many would see such oversight as overreach by an arbitral institution.

     

    Ethics for Party Representatives

    The Working Group stated that the Draft SIArb Guidelines seek to prescribe a set of minimum standards or guiding principles for ethical behaviour that are generally accepted by both common law and civil law jurisdictions. Guiding principles, rather than binding rules, were preferred by the Working Group (a) given the quasi-judicial nature of arbitration, (b) since some party representatives may be non-lawyers who are not accountable to a national bar association, and (c) to avoid procedural discrepancies that may arise from applying different ethical – and, by extension, legal-cultural – standards collated from various countries.

    In crafting the Draft SIArb Guidelines as minimum standards, inspiration was drawn from a variety of national bar rules from both common law and civil law jurisdictions, including the Singapore Legal Profession (Foreign Representation in Singapore International Commercial Court) Rules (2014), the United Kingdom Solicitors Regulation Authority Overseas Rules (2013), and the Regulation of the Law Society of Thailand on Lawyer's Ethics B.E. 2529 (AD 1986).

    The Working Group then fleshed out the three Guiding Principles of the SIArb Draft Guidelines, i.e., (1) the party representatives’ duty to respect the integrity of the arbitral proceedings, (2) their duty to act honestly and with integrity in all dealing with the arbitral tribunal and parties; and (3) their duty to treat the arbitral tribunal and other parties with respect and the highest degree of professionalism.

    Notably, no sanctions regime is prescribed at this stage, given the difficulty of enforcement outside the jurisdiction of an arbitral tribunal or institution. The Working Group further noted then even if the matter is within a tribunal’s jurisdiction, the tribunal may be vulnerable to accusations of impartiality if it attempted to address both the case on the merits, and allegations of party misconduct. It also stated that it chose to leave out prescription for standards in controversial areas where practices diverge between civil law and common law jurisdictions, such as discovery and witness preparation. In any event, it noted that the minimum standards that are being prescribed could still be applicable to these situations, including reliance on the obligation to act honestly in all dealing with the Tribunal and parties,stipulated in Guiding Principle 2 of the Draft SIArb Guidelines, to compel parties to disclose or avoid destroying relevant documents.

    The Working Group acknowledged that while the minimum standards may appear uncontroversial, that may not always be the case. For example, potential complications could arise where a counsel is subject to more than one code of ethics because she is qualified in multiple jurisdictions. Another variation on this theme would be a transnational team of arbitration counsel from various jurisdictions, and the question of whether the team should be expected to adhere to common standards.

     

    A Spectrum of Ethical Regulation or a ‘Teenager’s bedroom’?

    Mr Born observed that ethics in arbitration is a complex and delicate subject that warrants closer scrutiny, but that has indeed been raised several times before, noting Professor Catherine Rogers’ call in 2002 for the development of ethical guidelines in arbitration. He also noted the spectrum of responses to the call for ethical regulation of party representatives. Specifically, he found that the Draft SIArb Guidelines are at one end of the spectrum advocating a de minimis approach, while the International Code of Ethics for Lawyers Practicing before International Arbitral Tribunals (the “Rio Code”), formulated by Doak Bishop and Margrete Stevens, is at the other end of the spectrum, advocating a globally binding Code of Ethics. (See, for a detailed discussion of the Rio Code, Doak Bishop & Margrete Stevens, The Compelling Need for a Code of Ethics in International Arbitration: Transparency, Integrity and Legitimacy, in Arbitration Advocacy in Changing Times 391-407 (ICCA Congress Series No. 15, Rio de Janeiro, 2010) (Jan van den Berg ed., 2011) ).

    In Mr Born’s view, the IBA Guidelines on Party Representation have taken a middle of the road approach, and, importantly, do not seek to override existing domestic rules in the home countries of counsel. He also noted the Swiss Arbitration Association’s aversion to further ethical rules for counsel, which he appears to share, and likened the preponderance of ethical rules and guidelines in arbitration, in jest, to a ‘teenager’s bedroom’. Mr Born ultimately took the view that to arrive at an international solution to the issue of conflicting ethical regulation, national regulatory authorities will need to collaborate to find a globally appropriate set of unified rules and sanctions that could replace national ones.

    He observed that the harmonisation of these disparate rules into a unified set of standards would be a difficult task and that whatever mechanism is adopted, it would need to be one that national actors would respect and subscribe to. Mr Born further queried into the desirable forum for the enforcement of ethical regulation; namely whether arbitral tribunals or arbitral institutions are better placed to be the regulator. For the latter to be effective, he suggested that a significant expansion over their role as understood today is necessary. He pondered whether this would really enhance the arbitral process.

     

    Commentary

    ‘Soft-law’ guidelines, while aplenty, are essential

    Mr Born’s colourful metaphor – i.e. likening the tangle of ethical guidelines to a ‘teenager’s bedroom – is not unfounded. Some might argue that ethical standards established by national regulators are sufficient to regulate counsel conduct. Observers, such as Michael Schneider go further to say that not only is there no need for further regulation, but that attempts to distil a unified set of guidelines are misguided and that the arbitration community should not seek to compel conformity with uniform standards. Yet another oft-cited critique is Toby Landau QC and Romesh Weeramantry’s plea to the arbitration community that “we risk regulating ourselves out of existence”—that too much regulation could undermine its ability “to accommodate an international clientele”; a solution that might cure the disease, but kill the patient. (See, for elaboration of this view, Toby T. Landau QC and Romesh Weeramantry, A Pause for Thought, in Albert Jan van der Berg (ed.), International Arbitration: The Coming of a New Age? ICCA Congress Series, Vol. 17, 496–537, 503 (Kluwer Law International, 2013))

     

    Notwithstanding the above critique, growing empirical evidence points towards a clamour for ‘soft law’ guidance beyond national laws to help counsel and arbitrators navigate ethical issues that arise in arbitration. According to the Survey on the Use of Soft Law Instruments in International Arbitration on the Kluwer Arbitration Blog between February and March 2014, over 60% of respondents report regularly using the IBA Rules on the Taking of Evidence. The survey also shows that the IBA Guidelines on Conflicts of Interest are widely used. About 37% of respondents use the Guidelines regularly and another 37% apply them occasionally. With regard to the IBA Guidelines on Party Representation, 3.2% of the respondents report always using them, 11.1% use them regularly, and 36.5% do so occasionally. Given that these Guidelines were only slightly more than a year old at the time of the survey, these numbers suggest considerable support for these soft-law instruments. (See, for a discussion of the survey results, Elina Mereminskaya, “Results of the Survey on the Use of Soft Law Instruments in International Arbitration”, Kluwer Arbitration Blog (5 Jun. 2014) )

     

    Several types of counsel misconduct have been categorised as “guerrilla tactics” –    including, unwarranted document production requests; frivolous challenges of arbitrators, anti-arbitration injunctions, and curial requests; ex parte communications; witness tampering; disrespect towards the tribunal and opposing counsel; and various other strategies calculated to frustrate an orderly, fair and expeditions hearing. In a survey conducted by the International Bar Association’s Arbitration Committee, 68 % of the 81 respondents reported that they had been subjected to or had witnessed guerrilla tactics (See, for a discussion of the survey results, Edna Sussman & Solomon Ebere, ‘All's Fair in Love and War – Or Is It? Reflections on Ethical Standards for Counsel in International Arbitration’, American Review of International Arbitration 22 (2011):612).   National laws and rules are insufficient to provide the guidance sought after by the community regarding guerrilla tactics. Catherine Rogers observed that there is often uncertainty even among national bar associations themselves as to whether local bar rules apply extraterritorially and, in some jurisdictions, ethical rules do not purport to govern counsel conduct in fora that are traditionally considered non-judicial.

     

    Tribunals may also be reluctant to turn to national laws when assessing allegations of counsel misconduct, as the ICISD tribunal in Hrvatska Elektroprivreda v. Republic of Slovenia ICSID Case No. ARB/05/24, Order Concerning the Participation of Counsel dated May 6, 2008 observed at page 23:

     

    “For in international system like that of ICSID, it seems unacceptable for the solution to reside in the individual national bodies which regulate the work of professional service providers, because that might lead to inconsistent or indeed arbitrary outcomes depending on the attitudes of such bodies, or the content (or lack of relevant content) of their rules. It would moreover be disruptive to interrupt international cases to ascertain the position taken by such bodies.” (Emphasis added)

     

     

    On the high seas of arbitration, bare minimum ‘coastal charts’ are insufficient

     

    In relation to the concern for flexibility in international arbitration expressed above, Catherine Rogers observed that its uncritical embrace is not sustainable in the face of the substantial changes that have occurred in the field over the past 20 years. Specifically, as the field of international lawyers has expanded in both number and in the variety of cultural backgrounds, informal social norms can no longer provide either adequate guidance or control in the face of increasing conflicts.  Moreover, diverse standards can lead to unfair outcomes as it may confer a decisive advantage to one party. An instance of this would be witness preparation. An Australian or Canadian lawyer would consider the practice to be unethical or even illegal to prepare a witness whereas an American lawyer may view it as malpractice to not prepare a witness. A civil law trained counsel may be ethically obligated to disclose to an arbitral tribunal information that a common law counsel is ethically compelled to maintain as confidential. In both these examples, allowing parties to carry on in their ethical silos would decisively benefit the counsel subjected to more permissive ethical rules. Allowing an uneven procedural playing field to fester would also undermine the legitimacy of arbitration in the long run.

    Mr Born asks whether the establishment of a minimum standards such as those in the Draft SIArb Guidelines are truly meaningful. The present authors say ‘yes’. As V.V. Veeder has aptly remarked, “just because international practitioners involved in international arbitration do not usually share the same legal culture, it does not mean that they are pirates sailing under no flag; it means only that on the high seas, navigators need more than a coastal chart.” (Emphasis added.) (See V.V. Veeder “The 2001 Goff Lecture – The Lawyer's Duty to Arbitrate in Good Faith”, 18 Arbitration International (2002, no. 4) p.431)

    While not binding in an arbitration, the Draft SIArb Guidelines provide a point of reference – the lodestar– for an arbitral tribunal to initiate a discussion with counsel as to what should be deemed to be appropriate conduct in the arbitration to curb guerrilla tactics and ensure fundamental fairness. A minimum standard also informs the progressive development of national rules in jurisdictions whose national laws may not already address specific ethical concerns relating to party representatives without a legal background.  As Bernard Hanotiau observed as recently as 2011, there has been in recent years a multitude of new entrants into international arbitration; a number of whom do not have experience in the arbitral process or are not familiar with the arbitration culture or its ethics (See Bernard Hanotiau, International Arbitration in a Global Economy: The Challenges of the Future, 28 J. Int’l Arb.89, 99 (2011)).

     

    Moreover, other soft law instruments, such as the IBA Guidelines on Conflicts of Interest have been useful to municipal courts when they have assessed challenges to arbitral awards on the basis of arbitrator misconduct. For example, in a 2008 decision (Swiss Federal Supreme Court, 1st Civil Chamber, Decision of March 20, 2008, 4A 506/2007), the Swiss Federal Supreme Court referred to the IBA Guidelines on conflict of when examining a challenge to an award relating to a dispute between a Swiss marketing executive and the Turkish Football Federation where the presiding arbitrator, the party-appointed arbitrator of the Federation and the Federation's counsel all belonged to the same professional organisation. In rejecting the challenge, the Court observed:

     

    “In order to verify the independence of their arbitrators, the parties can also refer to the IBA Guidelines on Conflicts of Interest in International Arbitration. .... Certainly, the Guidelines do not have force of law, yet constitute a valuable working tool to contribute to the uniformization of standards in international arbitration in the area of conflicts of interests. As such this instrument should impact the practice of the courts and institutions administrating arbitration proceedings …” (Emphasis added.)

     

    Similar examples are also evident in other jurisdictions such as the U.K and the United States (See, for example, ASM Shipping Limited of India v. TTMI Limited of England [2005] EWHC 2238 (Comm) and New Regency Productions v. Nippon Herald Films 501 F.3d 1101 (9th Cir. 2007))

     

    Multiple Stakeholders Acting in Concert

    Likewise, the Draft SIArb Guidelines could provide meaningful guidance for municipal courts in the region. The guidelines could mutually reinforce international initiatives, such as UNCITRAL’s Code of Ethics for Arbitrators in International Commercial Arbitration. Recently concluded investment agreements have also included a code of conduct for arbitrators, in order to ensure respect of high ethical and professional standards. Notably, such codes define procedures to follow in order to ensure that any situation that could give rise to real or perceived ethical breaches are fully disclosed. They could even pave the way for other responses in the spectrum referred to above, including the Swiss Arbitration Association’s ambitious proposal for a ‘Global Arbitration Ethics Council’ as a transnational body with jurisdiction to enforce ethical principles and to sanction violations.

    The Draft SIArb Guidelines are but one in a range of responses to contemporary ethical challenges in arbitration. Doak Bishop suggested, in a 2010 Keynote Address to the International Council for Commercial Arbitration (“ICCA”), a holistic approach wherein international bar associations, such as the ICCA or the IBA “appoint a working group of lawyers from different legal systems and geographical areas, including representatives of the major arbitral institutions, to consider their proposal, perhaps along with others, with a view toward building a consensus around a Code of Ethics that will have widespread support and can be adopted.” Bishop further suggested “the major arbitral institutions consider incorporating this Code into their rules by reference”.(See Doak Bishop, ICCA, Keynote Address: Advocacy and Ethics in International Arbitration, 1 (May 26, 2010))

    Such a multi-stakeholder approach would move away from the polemic debate of whether an arbitral tribunal or an institution is better placed to regulate ethics, and instead suggests greater complementarity between the two. This approach also calls to mind an idea mooted by Chief Justice Sundaresh Menon (“Menon CJ”) at the 2016 Herbert Smith Freehills - SMU Asian Arbitration Lecture, of an independent global disciplinary adjudication process ‘presided over by arbitrators selected from a list … maintained by the Chartered Institute of Arbitrators (“CIArb”)’ for complaints against arbitrators (See Speech subsequently published as 'Adjudicator, Advocate, or Something in Between? Coming to Terms with the Role of the Party-Appointed Arbitrator' (2017) 34 Journal of International Arbitration, Issue 3, pp. 347–371 at pg 370-371.)

    [CIArb is] in the process of drafting a set of rules that will allow instances of arbitrator misconduct to be referred to and resolved by CIArb as a completely independent institution. …Where a complaint arises in a given case, we envisage that the rules will establish a tiered system under which the complaint will first be raised to the arbitral institution administering the arbitration. If justifiable cause for complaint is found on a preliminary inquiry by the institution, the matter will then be referred to CIArb, which will consider the matter further. CIArb may take no further action, or it may administer disciplinary proceedings presided over by arbitrators selected from a list of qualified practitioners maintained by CIArb. …  I expect this will contribute over time to the development of a corpus of law on the standards of conduct of arbitrators which can then educate and guide practitioners from any jurisdiction.”[1] (Emphasis added.)

     

    Third-party funding as a comparator

     In our view, there are thus distinct roles for CIArb, SIArb, SIAC, and the Law Society of Singapore to play. The regulatory approach to third-party funding of arbitrations in Singapore underscores such complementarity. In the aftermath of legislative changes to the Civil Law Act and the Legal Profession (Professional Conduct) Rules 2015 permitting such third-party funding, SIAC, SIArb and the Law Society of Singapore have stepped forward to provide further guidance on standards of conduct arbitrators, third party funders and lawyers should adhere to. [See SIAC Practice Note 01/17, SIArb Guidelines for Third Party Funding and Law Society Guidance Note 10.1.1 respectively.] Crafted in support of legislation, these soft law instruments provide a useful baseline of proper conduct to guide the relevant stakeholders, whilst ensuring flexibility is not compromised by excessive hard-coding.

     

    Similarly, the Draft SIArb Guidelines are but one in a range of soft law responses to contemporary ethical challenges in arbitration, and which could, in due course, lead to practical (and even legislative) reforms in Singapore. In other words, we believe these Guidelines may also serve as a lodestar for ethical regulation in arbitration in Asia and beyond.

     

     

    Mr VK Rajah SC’s Proposal - Singapore as a ‘first-mover’ for Ethical Regulation of Arbitration

    Delivering a speech at the SIArb Annual Dinner on 1 November 2017, Mr V.K Rajah proposed that it was in Singapore’s enlightened self-interest to provide ethical leadership underpinned by pragmatism.  This is a task he suggested should be undertaken now without waiting for an international consensus; noting that should such a consensus emerge tomorrow, Singapore can always subscribe to aspects which prescribe higher standards than what it voluntarily chooses to abide by today. Specifically, he called for, first, the formation of local ‘opt-in’ rules which can then be converted into mandatory codes whilst actively collaborating with major arbitration associations, professionals and institutional bodies to move towards consensus.

    He also suggested that consensus-building could be facilitated through the adoption of model language into international instruments; suggesting, in the context of investor-state arbitration, a ‘next generation’ international convention akin to the Mauritius Convention on Transparency in Treaty-based arbitration, which itself rests on the shoulders of the UNCITRAL Rules on the same topic.

    Mr Rajah posited that such a proactive approach to establish prescriptive standards is characteristic of Singapore’s uniquely strong ethical branding and will give Singapore a first mover advantage which would yield professional and commercial dividends. It would also prevent ethical disingenuity of upholding one standard of ethics before the courts and another lower standard before arbitral tribunals. He alluded to the consensus, noted by Menon CJ that “the more localised the process, the greater the prospects of transparency and legitimacy”, in the development of such rules, and certainty in their application. Ultimately, ethical leadership could cement Singapore’s position, in Mr Rajah’s words, not just in the "premier league" of arbitration centres but in a “super league”.

    The present authors note that a robust prescriptive approach pioneered by national policy-makers and other stakeholders would address the problems of double deontology directly. Indeed, many regulatory bodies already require lawyers to respect the conduct rules at the seat of the arbitration. (See for instance, Article 8.5(b) of the American Bar Association Model Rules of Professional Conduct (2000), and Articles 4.1 and 6.1 of the European Commission Directive 98/5/EC of 16 February 1998 To Facilitate Practice Of The Profession Of Lawyer On A Permanent Basis In A Member State Other Than That In Which The Qualification Was Obtained).

    A jurisdiction-led approach to ethical regulation is not without precedent, as evidenced by the London International Court of Arbitration’s (“LCIA”) “Annex for Legal Representatives” that enumerates several ethical guidelines for legal counsel engaging in LCIA arbitration. As the first set of institutional rules on counsel ethics, it has been met with an overwhelmingly positive response by the international arbitration community. Viewed together, the LCIA Rules and the Draft SIArb Guidelines could provide a good starting point for ethical rules in arbitration that could be enforced contractually in the absence of a binding code. Reference to these rules and guidelines could be consensually included in the arbitration clause, similar to the way IBA Rules of Evidence have been adopted in international arbitration proceedings through the arbitration clause.

    We are mindful that absolute homogeneity in ethical standards should not be expected, nor should stakeholders seek to stamp-out legal pluralism. Several UNCITRAL Model Law- jurisdictions, for example, have adopted varying versions of the UNCITRAL Model Law, or adapted the principles therein in accordance with their own local customs and circumstances. The variety of approaches around the world gives meaning and value to party autonomy that is a fundamental principle of international arbitration, and enhances the attractiveness of this form of dispute resolution to users.

    An important, intermediate step Singapore could take towards building international consensus could be in leading a regional one in Asia. As noted in SIAC;s 2016 Annual Report,Asian countries, namely China, India, Malaysia, Philippines, Indonesia and Myanmar were collectively the biggest foreign users of the SIAC in 2016.For many of these jurisdictions, the SIAC Rules, in particular innovations such as early dismissal and emergency arbitrator mechanisms, inspire aspects of their own arbitral procedure.Singapore also has precedent in providing regional ethical leadership. For instance, its regulation against corruption has also been viewed in the region as an ethical gold standard.

    Mr Rajah has thrown down the gauntlet for the international arbitration community to ask not only what should be reformed through ethics codes, but why and how Singapore could take the lead in proposing reforms. His words will be keenly studied by scholars, practitioners, policy-makers - and most importantly - by users of international arbitration. Widely recognised arbitration conventions are named after the cities they are concluded in, such as New York, Washington and, recently, Mauritius. The authors look forward to the day there is a Singapore Model Law or Convention for ethics in arbitration. Mr Rajah's proposal is also timely, given Singapore's position as a top arbitration centre in Asia and the world, and also given its chairmanship of ASEAN next year and its aim to facilitate the ASEAN Economic Community (AEC) 2025 plan. Uniform standards in commercial and investment arbitration is crucial to ASEAN's economic integration agenda from 2017 to 2025.

    Conclusion

    The ethical landscape in international arbitration has been likened to a “no man’s land,” in the words of Catherine Rogers, and most recently to a teenager’s cluttered bedroom, in the words of Gary Born. It will be important for the international arbitration community to identify and move towards an ethical lodestar to protect and sustain the legitimacy of international arbitration as a credible dispute resolution process that adheres to the best traditions of commercial adjudication as well. The quest for this lodestar, and the prospect of Singapore’s key role in formulating and navigating the paths it charts, merit close scrutiny.

    * This blog entry may be cited as Mahdev Mohan, Siraj Shaik Aziz, “A Quest for Ethical Regulation in Arbitration” (6 November 2017) (http://www.singaporelawblog.sg/blog/article/XXX)

    ** A PDF version of this entry may be downloaded here


     

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