MARKET VIEW – ARBITRATION
What’s so great about scrutiny? ICC International Court of Arbitration secretary general Andrea Carlevaris discusses his institution’s calling card with White & Case partner Michael Polkinghorne
There are no bad arbitrators, only inappropriate arbitrators for specific cases. So says ICC International Court of Arbitration secretary general, Andrea Carlevaris, the man charged with registering more than 750 disputes a year at the Paris-headquartered body. Indeed, such is the demand for its services that the court now works through August – ‘a very serious consideration’ in France, John Beechey, the institution’s president, told the audience at an arbitration event in Prague last summer.
Michael Polkinghorne, White & Case: As a former member of the court, my experience was that it was rare to find an arbitral award that did not benefit in some way from scrutiny. Besides the small number of cases in which a serious error was picked up, I found that scrutiny contributed to the overall quality of awards. It was nevertheless remarkable how often one could identify substantive issues such as the miscalculation of interest, which perhaps says something about the mathematical power of lawyers. Speaking as an arbitrator, however, I can say that anything which makes the tribunal look good will be popular.
Andrea Carlevaris, ICC: I agree. It is not a cosmetic process; the purpose is not to impose an ‘ICC style’. The court is absolutely respectful of the different styles which exist of drafting arbitral awards. In scrutinising awards, the court’s goal is to make them sounder from a legal point of view, which means they are more easily enforceable and less challengeable. The secretariat undertakes a preparatory review before the award is submitted to the court. However, especially for major comments, the secretariat always seeks the court’s approval before making recommendations to the arbitral tribunal. Precisely to ensure that our awards are legally sound, we seek to involve in the process court members with knowledge of the law of the place of arbitration or of the law applicable to the merits, thereby hopefully avoiding problems that may jeopardise the enforceability or validity of ICC awards.
Michael Polkinghorne: I would add that scrutiny, although an incredibly valuable process, is about bringing matters to the attention of the tribunal, not replacing their reasoning. It is the tribunal which ultimately makes the decision on the merits; the court simply provides a safety net. The power vests, and must remain, with the arbitrators.
‘it was rare to find an arbitral award that did not benefit in some way from scrutiny.’ Michael Polkinghorne, White & Case
Few arbitrators are immune. In 2010, for instance, 444 of the 478 awards rendered by ICC tribunals were returned with suggested corrections. Written feedback is also provided, which in serious cases will be accompanied by a phone call from a senior member of the secretariat explaining where and why the award was lacking. Did each of those cases simply involve the wrong person for the job? Most users of international arbitration may argue otherwise, armed with horror stories of arbitrators being unprepared, uninterested and unable to stay awake during hearings. What, then, does the ICC look for when making appointments to ensure that the worst offenders are weeded out at an early stage?
Andrea Carlevaris: Our general criteria are experience, availability, case management skills. If I had to select one aspect above all others, it would be a potential appointee’s suitability for the case. Applying only the criterion of experience would create the situation whereby a limited number of eminent arbitrators would be appointed to hear the ICC’s entire caseload, which clearly would not be either appropriate or feasible. We try to find the right candidate for the case, which can mean opening up the process to younger arbitrators and non-lawyers with experience of the industry concerned. Some knowledge of arbitration is needed, of course, but we don’t lose sight of the fact that the subject matter of the case can be as important, if not more so, than the procedural and jurisdictional issues. We encourage our national committees to propose new names. They too have a mission to find candidates in their jurisdictions. Indeed, they may be better placed than us to identify and reach out to new people.
Michael Polkinghorne: Bringing in the new generation is important. There is arguably a need for people to be a little more proactive in promoting diversity than has been the case up until now. That being said, I have never been involved in a case where – questions of nationality and experience aside – a person’s ethnic background, sexual preference or gender has been a determining factor. When selecting arbitrators, we look for the best person. One problem, however, is that we still operate in an area which is male preponderant, with the result that tribunals often reflect this wider population.
Andrea Carlevaris: The diversity consideration, which of course is important to the court, does not come at the beginning of the process. We don’t actively look for women when considering an appointment, but if two or more candidates are equally qualified, we will likely give a slight preference in favour of diversity. Women are very well represented in the younger generation of lawyers, so I certainly expect this issue to be less sensitive in the future.
Andrea Carlevaris, ICC
Conflict, corruption, absolutely
One of the more curious features of institutional arbitration is that the body under which auspices a tribunal renders an award may be the last to hear of challenge proceedings brought against that award. The ICC is no exception. ‘We are not always aware of challenges,’ confirms Carlevaris, whose appointment as secretary general saw him join the court for a second time, having previously served as counsel in its secretariat before taking partnership at leading Italian law firm, Bonelli Erede Pappalardo in 2010.
The court will usually learn about a challenge attempt in one of two ways. The successful party in the arbitration may request that the ICC provide it copies of the award in anticipation of a contested enforcement hearing. (Article IV of the New York Convention requires that recognition and enforcement are preconditioned on the claimant’s ability to produce an authenticated version of the original award.) Other times, it will only become clear to the court with the publication of a domestic court’s ruling on enforcement or, more ominously, set aside.
Michael Polkinghorne: Awards have recently been attacked on the basis that a member of the tribunal was in some way biased. Has the ICC seen a rise in the number of those types of challenge?
Andrea Carlevaris: We have experienced an increase in the number of challenges relating to alleged independence or impartiality on the part of one or more of the arbitrators, but also an increase in the number of challenges which the court considered well-founded. This may reflect a growing problem of conflicts of interest within the international arbitration community. Nevertheless, the simple fact of choosing institutional arbitration guarantees that the institution controls the constitution of the tribunal, ensuring the independence and impartiality of arbitrators more than would be possible in ad hoc arbitration.
Michael Polkinghorne: Another area that has started to attract attention is ‘issue bias’, where arbitrators have expressed in publications certain positions germane to a dispute, leading to concern from the parties that their position will be prejudged.
Andrea Carlevaris: We do see challenges based on those grounds, albeit not with any more frequency than before. Whereas that kind of challenge is becoming popular in investment arbitration, it is rarer in the commercial context to see the same issue arise in numerous cases. That said, we are now regularly seeing a ground for challenge based on the involvement of an arbitrator in a related case. The applicant will argue there is a risk that the arbitrator has prejudged the issues that arose in the related case, or alternatively that one member of the tribunal may be privy to important information that gives them an advantage over their fellow arbitrators.
‘Firms of all sizes can be guilty of furthering the development in arbitration of an unholy marriage between the procedures of civil law and common law.’
Michael Polkinghorne: How does the ICC deal with challenges on the grounds of corruption, rare as they may be?
Andrea Carlevaris: There are two different points of view as regards corruption – that of the arbitrator and that of the institution. On the other hand, the difficulty of adducing evidence to demonstrate the existence of corruption applies to both equally, although I get the sense that things are slowly moving in the right direction. For example, it is now extremely rare to find an arbitrator who declines to take jurisdiction because of allegations, or findings, of corruption. The very high standard of proof that was sometimes applied in these cases is also changing, and arbitrators may rely upon so-called red flags or circumstantial evidence in finding that there was corruption. From the perspective of the institution, although establishing evidence of corruption can be difficult, we do not hesitate to use our limited powers when we think they are needed – for example, by refusing to register a case or approve an award if we have clear indications of wrongdoing.
Michael Polkinghorne: Are you able to discuss what those types of cases or awards might look like in practice?
Andrea Carlevaris: As to the former, the secretariat will not register a case if it is not persuaded that a dispute actually exists. We have had cases in the past with no participating respondent, seemingly fabricated evidence, an award rendered within a few months and no problems with enforcement. Similarly, the respondent may accept jurisdiction even if the arbitration agreement is very weak, or accept liability on points that would normally be contested. Those are the type of situations that raise eyebrows. In cases where there are allegations that the proceedings are being funded by revenues from illicit activities, the secretariat’s powers of investigation are again limited, although there may be red flags to suggest that the court should not register the case or approve the resulting award.
An unholy marriage?
Michael Polkinghorne: There is sometimes a perception that international arbitration is dominated by the English and American law firms. Do you agree? Does it matter? What impact does it have on the practice of arbitration?
Andrea Carlevaris: I don’t agree entirely. That dominance may be true for the larger, truly international cases, but the diversity of parties in ICC cases is reflected in the diversity of counsel retained by those parties. Does it matter? I’m not sure that it does. Many international law firms, including those mainly based in the UK or in the US, are now truly global: they have offices in all parts of the world and employ lawyers from each of those jurisdictions. For that reason alone, international arbitration is less dominated by the UK and US lawyers than it used to be. Moreover, arbitration law has elements both of common law and civil law traditions, meaning that the procedural elements of cases are more or less standardised.
Michael Polkinghorne: When you look at the profile of an international arbitration group at a firm like White & Case, the partners within are becoming a pretty diverse bunch. As for the idea of ‘Big Law’ dominance, I think ethical and commercial conflicts within large firms will always have a tempering effect on any ‘threat’.
Firms of all sizes can, however, be guilty of furthering the development in arbitration of an unholy marriage between the procedures of civil law and common law. Whereas the former traditionally placed emphasis on producing lengthy written memoranda in the lead up to a short hearing, the latter approach involves a limited form of documentary exchange followed by a detailed exposition of the issues before the tribunal. The result: long memorials followed by long hearings. ‘It is often the large firms dealing with the large cases which find themselves in the situation where this type of approach is in the best interests of their client,’ notes Polkinghorne. ‘It is also true that in some cultures, this means a policy of leaving no stone unturned,’ he adds.
Andrea Carlevaris: Things are changing and parties are becoming much more careful in this regard. At the ICC, we have tried to show that there is an alternative, which is effective case management. We encourage parties to agree on a balanced procedure that combines elements of the common law and civil law where necessary, although that is clearly not appropriate in all cases. Whatever approach they choose, it should be consistent, coherent and reasonable, and related to the magnitude and complexity of the case.
About the authors
Michael Polkinghorne is a dual-qualified (civil and common law) lawyer, resident in Paris where he heads the White & Case office’s arbitration department. He focuses on arbitration and litigation matters, notably in the areas of energy, telecommunications, project finance, and infrastructure. Having served as counsel and arbitrator in arbitrations conducted under most major institutional and ad hoc rules, he has helped to resolve disputes for a range of significant commercial and sovereign clients. He is a former Australian member of the ICC International Court of Arbitration, and a current member of the ICC task force on arbitrations involving state entities.
Andrea Carlevaris has served as secretary general of the ICC International Court of Arbitration and director of the ICC Dispute Resolution Services since September 2012. Before joining the ICC, Andrea was a partner in the Rome office of Bonelli Erede Pappalardo. His practice covered international arbitration, judicial proceedings involving issues of public international law, conflicts of law and international civil procedure. Prior to Bonelli Erede, Andrea was counsel at the Secretariat of the ICC International Court of Arbitration, and was a member of the ICC International Court of Arbitration and of the ICC Commission on Arbitration.
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