Arbitrator is a Private Judge Essay

Introduction

Arbitration is a private process that is aimed at resolving the legal matters between parties.¹ An arbitrator is a party that decides over the rightness or wrongness of the claims of the people who are in dispute. These parties are often private, and the process is, therefore, considered a matter of privacy. On the other hand, the word private may be looked at from another angle. “Hiring” or “owning” a judge can sometimes be the sense that people put into the notion “private judge.” In light of the fact that there are people who consider arbitrators as private judges in the negative meaning of the word, there is a need to discuss the concept of the arbitrator as a legal actor. This essay argues that the notion of an arbitrator being called a private judge in a negative sense has certain grounds beneath it.

The Role of an Arbitrator

To discuss the statement of an arbitrator being a private judge in any context and meaning, the ambiguity should be eliminated. In the context of this essay, there is a clear necessity to develop a full understanding of who an arbitrator is, and what is his or her role. According to Lowenfeld, who himself is an arbitrator, it is a kind of a legal dispute settling force that resembles more a judge than an advocate.² The choice of words here is particularly peculiar. The ambiguous nature of arbitration is revealed through its process.

Thus, if two parties have a conflict about a contract they can ask a legally-competent person to become the dispute settling force in their matter. The other side can do the same. Then it descends to the two selected judges who interpret the details of the case and the third judge presiding over the process. In reality, however, Lowenfeld notes that some arbitrators tend to become biased. They can defend the rights of those who expressed their heartfelt acknowledgement of the skill of the selected arbitrator. The selection of an arbitrator or a private judge is often a procedure that requires a written note where a party kindly asks a person to participate in a private trial. This is where it becomes a concern for many, who believe that the process is unfair and arbitrators are no more than hired advocates. Yet, the role of an arbitrator presupposes a great deal of reliance on one’s reputation. The choice of an arbitrator is always a serious matter.

An arbitrator is often chosen by lawyers of both parties. It is in the lawyers’ interest to select the best person for such job as the decision that is made by the arbitrator is binding, and no other court or law can override their decision. Once the matter is decided, and arbitrators pass their verdict, the decision becomes binding for all parties. Therefore, an arbitrator should possess the qualities of an excellent expert in the branch of the law that is of interest to parties. Practical experience in the sphere is also valued as the quality of the decision is also dependent on the judge being able to consider the practical side of the matter together with legal one.

Another critical issue about the role of an arbitrator is their adherence to a certain sphere of practice. For instance, an arbitrator that is a member of community or an organization that is somehow connected to the matter at hand rarely can be objective. As such, in the case of AT&T Corporation v Saudi Cable Co³AT&T appealed that the third arbitrator selected was working for the company that was a direct rival of AT&T and, therefore, could not be an arbitrator for the case. It once again shows that arbitrators have a high potency to represent interests of a certain party other than serving as objective and law-protecting decision making agents. From this stems the ambiguity that persists the question of this essay.

Thus, the nominal role of an arbitrator is to be the unbiased decision maker for a private process of dispute settling. Each of the three arbitrators usually is selected to serve the purpose of balancing each other’s decisions with the third-party arbitrator chosen to preside over the two selected by the lawyers of the two parties. However, the matter tends to be a delicate one. There seems to be such a great deal of personal belief in the skill and authority of a person that factors like occupation are often neglected.

The Question of Objectivity

Since the role of an arbitrator is to establish law and order in the settings of a private dispute, the objectivity becomes a concern. Here, objectivity can be considered a contextual synonym of not swearing mental allegiance to one of the parties (presumably one that selected an arbitrator). On the one hand, everything about a person that is called to become a dispute settler is far from objective. Despite the fact that the lawyers are reasonably in a position to select a truly worthy candidate to preserve order, they are equally interested in choosing a candidate that is close to the company they represent in one sense or another. As such in Applied Industrial Materials v. Ovalar Makine Ticaret Ve Sanayi⁴the allegations were made that the arbitrator had a particular interest in the outcomes which enabled him to review the matter overly briefly. Yet, this was not the only concern.

The knowledge was also found to be insufficient, and the choice of the arbitrator was questioned. Here again, stands the question of objectivity. The Supreme Court proceeds with discussing if the party had the knowledge of the arbitrator having the adequate qualification and affiliation with an interested party. It seems to be impossible to inquire if the person has some knowledge if he or she does not want to reveal such a fact. Yet, the Court uses the term “evident partiality” and develops a determination that a reasonable person must have seen bias and decided to conceal it.

On the other hand, it is not only the matter of the arbitrator’s bias. It is the foul intent of the parties who choose such arbitrators. It seems that the art of arbitration process and dispute settlement is the ability to chose an arbitrator who will be advocating for the party’s interests but does so unwittingly and invisibly. Therefore, the ‘privacy’ of such a judge starts from the people who select them. In addition, the experience and skill that is so important and become the important factor for choosing an arbitrator come from fieldwork. Since that fieldwork is only considered if it is done in the specific area of practice relevant to the case at hand, should it be considered bias if the candidate has the experience in one of the firms connected to the parties? Again, if arbitrator’s knowledge about the dispute is considered bias and not experience, then how one chooses a good arbitrator? The answer to those questions seems to lie in the area of the procedure. Usually, the third party arbitrator is chosen for the purposes of objectivity. The judges chosen by the parties together select a third-party arbitrator that will oversee their work and should, theoretically, make the process more objective.

The possibility of an arbitrator to be objective is, therefore, handled internally. The neutrality of a third candidate should be guaranteed, yet the previous case states that it is not always true. Fabrikant either concealed his affiliation in business with one of the parties or truly did not know about it. The Supreme Court decided that it was reasonable to believe that he had demonstrated an appearance of partiality.⁵ The system seems to be flawed in its ability to create equal conditions and impartial decision making process. In H v L and others⁶English Commercial Court stated that the new procedures to establish the absence of bias are needed. Independence and objectivity are an issue, and the arbitration communities need to take action to reform their field of expertise.

The Question of Privacy

English Commercial Court stated that the new procedures to establish the absence of bias are needed. Independence and objectivity are an issue, and the arbitration communities need to take action to reform their field of expertise.

Given the questions of objectivity and the role of an arbitrator, the phrase “private judge” needs to be examined. Privacy here can be understood in its basic meaning as information that is kept from other parties. As the two disputing parties have a common information field, they seem to establish common privacy. Due to the fact that they cannot or will not take the matter to court directly, as it can somehow affect their matters, parties decide to include in their privacy a third party. That party is the arbitrators. From this point of view, a private judge seems to have a positive connotation and reveals the quality of an arbitrator as a keeper of secret information. As a matter of fact, given the general wish to keep private matters away from sight, the parties want their arbitrators to be indifferent to the disclosure and, therefore, to the matters themselves. Yet, as Lowenfeld notes, often parties want to communicate to a potential arbitrator in person and talk about the matters of the case.⁷ In a direct conversation, there is often a high chance of letting one’s vision of the problem that an arbitrator might share or at least consider becoming what one can call a private judge.

From another perspective, privacy may be considered as a commitment to one or the other party, or unfairness of judgment. Each party is determined to preserve its own interests or at least keep others from interfering with them. Thus, it would be logical to assume that parties would also want an experienced and knowledgeable person to judge their dispute. Yet to truly preserve those interests it will require more than experience and knowledge. This goal requires closeness of ideas. A certain paradigm of thought that is known to be of value to a certain party. In an interview, one might inquire about the arbitrator’s previous work and identify the patterns that will be of use to the party during the hearing. Being the supporter of textualism or contextualism will potentially affect the possible fact of advocacy for one or another side. This

Race, gender, and ethnicity can also become a problem that may cloud judgment and become a factor that undermines objectivity. One may not exhibit personal interest in the matter or necessarily advocate for one or the other party, but be a zealous opposer of a certain fact or have a prejudice against some race.⁸ This was demonstrated in The Owners of the Steamship Catalina v. The Owners of the Motor Vessel Norma⁹ where an arbitrator expressed the concern for the truthfulness of the word of any Italian. The arbitrator was dismissed. The fact that he was chosen and the assumption that the party who invited him knew of his views remains a vivid factor that speaks against a selection-by-party procedure.

Thus, what private judge seems to be a concept that is a standing problem in cases of the past and modern ones. It defines the relationships between the arbitrator and the parties. The matter of privacy investigated from both angles tells that privacy is a connection that emerges between the arbitrator and the party as a result of the closeness of ideas, personal interest, or the personal prejudice against the other party. The information becomes the catalyst of such prejudice.

Counterarguments

There are also considerations that ‘private judge’ implying bias of the arbitrators can be avoided and should not be thought of negatively. The main argument in favor of such determination is the presence of the third-party arbitrator. Such judge is chosen to preside over the two party-selected decision-makers and make sure no bending of the laws is used. This third arbitrator is selected by a mutual agreement of the two arbitrators selected by parties. The chance of them to select a third one that suits only one of the companies’ interests is rather small.

In addition, generally, the organizations have guidelines as to how to select the candidate for arbitration. In the guidelines created by the Chartered Institute of Arbitrators, it is stated that to establish a bias-free arbitration process, a third judge is to be selected.¹⁰ In addition, in the process of interviewing candidates for arbitration, both parties need to be present in the interview to ensure that an appropriate and impartial candidate is chosen. This measure also does not allow to open a dispute on biasness of the party-selected arbitrator because all parties pre-approved the selection and, therefore, confirmed that this person is qualified to settle their dispute. Given that fact, if such guidelines are followed the possibility of ‘private judgments’ is close to zero.

Another factor that can speak to the absence of the issue with arbitrator bias is the presence of the mechanisms that determine the fact of bias. As such, if any party suspects the link between the arbitrator’s decision it can file a suit to restore justice and nullify the decision it is found to be biased. The mutual interest of such a judge and one of the parties can also be identified. The courts often implement the concept of a reasonable person to solve such cases. The application of such a concept allows telling if an arbitrator had any interest in the decision and if he or she had a connection with any of the arguing parties. This mechanism allows having additional control over the process of arbitration. The existence of such a mechanism also deters arbitrators from being impartial. By agreeing to participate in the arbitration process, each judge places his or her reputation on the line. If he or she is taken to court with an allegation of impartiality or bias, this might seriously affect his position in the legal sphere. In addition, it could lead to the termination of his or her current employment contract.

Refutation of Counterarguments

It is undoubtful that there are special mechanisms that can protect the arbitration process from bias. However, there can also be limitations to their use. These drawbacks can lead to impartiality and the overall low quality of the arbitration process. As such, the selection of a third-party arbitrator mentioned earlier as a measure to reduce bias can be not as effective as it is widely believed. For instance, Gent and Shannon find that bias of third-party arbitrators is rather common and was more than once noticed throughout the history of international and internal disputes.¹¹ It could be argued that the cases of bias are rather rare and that it is mass media who make the problem bigger than it is. Yet, even rare occasions speak to the evident flaw of the procedure. In the cases mentioned above, third-party arbitrators were found to be impartial, and their decisions were nullified. This generates additional legal costs for parties and decreases the chance for peaceful resolution of the conflict. In addition, it takes additional time to select arbitrators again.

The existence of biased arbitrators, even if some researchers believe their numbers are small still cast a shadow on the process. It gives improper meaning to the phrase “private judge,” undermining the whole procedure of arbitration. The mentioned guidelines established by professional organizations are not legally binding and do not require parties to follow them. They are, but a recommendation, and not every company follows them. Courts of law that are considered effective mechanisms that deal with arbitrator bias are not effective in the process of arbitration or before it. Courts can only settle the matter after the bias is identified. They cannot process a case if none of the parties files an official complaint. Therefore, they can only deal with the consequences of ‘private judge’ actions.

The deterrence effect of courts is also doubtful. Similar to regular crime, the existence of prisons by itself does not seem to significantly lower crime rates. In addition, the arbitrators who simply apply their usual judgment to the case at hand may not even realize that they are biased. The reputation loss is a risk that many private judges are willing to take if they see a financial or other interest in deciding in favor of a certain party.

Conclusion

All things considered, the statement “arbitrator is a private judge” is partially true to life. The whole process of arbitration seems to be somewhat biased. Parties that select their arbitrators have methods of choosing ‘the right one who will unwittingly defend their interests. The closeness of ideas that can be known from public sources or previous experience of a possible arbitrator can be used to select a private judge. More blunt and direct mechanisms can also be used, which speaks further to the truthfulness of the statement. However, not every arbitrator is a private judge. Despite the problem of bias exists, there are still companies and arbitrators who value their reputation. In addition, there are mechanisms that can minimize bias in the process of arbitration. The imperfections of such mechanisms sadly give the reason to believe that certain arbitrators can be private judges.

Bibliography

Cases

AT&T Corporation v. Saudi Cable co. Court of Appeal [2000] 2 Lloyd’s rep. 127.

Applied Industrial Materials v. Ovalar Makine Ticaret Ve Sanayi [2007] USCA 9.

H v L and others [2017] EWHC 137

The Owners of the Steamship Catalina v. The Owners of the Motor Vessel Norma [1938] 61 Lloyd’s Rep. 360

Books

Margaret Moses, The Principles and Practice of International Commercial Arbitration (Cambridge University Press, 2017) 127.

Chartered Institute of Arbitrators, Interviews for Prospective Arbitrators (Chartered Institute of Arbitrators, 2016) 2.

Journal Articles

Andreas Lowenfeld, The Party-Appointed Arbitrator in International Controversies: Some Reflections (Texas International Law Journal, 2016) 60.

William Park, Arbitrator Bias (Boston University School of Law, 2015) 6.

Stephen Gent, Megan Shannon, Bias and the Effectiveness of Third-Party Conflict Management Mechanisms (Conflict Management and Peace Science, 2011) 1.

Footnotes

1. Margaret Moses, The Principles, and Practice of International Commercial Arbitration (Cambridge University Press, 2017) 127
2. Andreas Lowenfeld, The Party-Appointed Arbitrator in International Controversies: Some Reflections (Texas International Law Journal 2016) 60.
3. AT&T Corporation v. Saudi Cable co. Court of Appeal [2000] 2 Lloyd’s rep. 127.
4. Applied Industrial Materials v. Ovalar Makine Ticaret Ve Sanayi [2007] USCA 9
5. Applied Industrial Materials v. Ovalar Makine Ticaret Ve Sanayi [2007] USCA 9
6. H v L and others [2017] EWHC 137
7. Andreas Lowenfeld, The Party-Appointed Arbitrator in International Controversies: Some Reflections (Texas International Law Journal 2016) 60
8. William Park, Arbitrator Bias (Boston University School of Law 2015) 6.
9. The Owners of the Steamship Catalina v. The Owners of the Motor Vessel Norma [1938] 61 Lloyd’s Rep. 360
10. Chartered Institute of Arbitrators, Interviews for Prospective Arbitrators (Chartered Institute of Arbitrators, 2016) 2
11. Stephen Gent, Megan Shannon, Bias and the Effectiveness of Third-Party Conflict Management Mechanisms (Conflict Management and Peace Science, 2011) 1.