Page 6 - Alternative Dispute Resolution

S6 | MONDAY, MARCH 28, 2016 | Alternative Dispute Resolution
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Trends in International

BY ERIC ORDWAY
AND LAUREN A. JACOBSON
Arbitration Challenges
A
critical feature of arbitration that distin-
guishes it from the judicial process is the
ability of parties to select the decision-
makers. For this reason, any developments in
the challenges to the selection of arbitrators
can be signiicant since they directly affect

this key right. Fortunately, most arbitrators
and arbitration counsel are sensitive to the
importance of arbitrator independence and
impartiality and the issues that might call
these requirements into question, and, as a
result, challenges are not that frequent. In
recent years, however, there appears to be an
increase in the overall number of challenges

in international investment arbitrations, as
well as an increase in the number of such
challenges being granted. There also appears
to be an increase in international arbitra-
tion challenges based on certain grounds,
including challenges based on so-called “issue
conlicts” and challenges based on repeat
appointments. In addition, commentators
report that more challenges are brought

for purposes of delaying the arbitration and
to obtain a tactical advantage. This article
considers these developments and looks at
how speciic arbitral institutions have dealt
with challenges.

Are Challenges on the Rise?
In recent years, commentators have report-

ed that challenges to arbitrators in interna-
tional arbitration have become more common
overall.1 This appears to be particularly true
with respect to investment arbitrations iled
before the International Center for Settlement
of Investment Disputes (ICSID), one of the CK
leading investment arbitration institutions STO
in the world. More than 50 percent of ICSID BIG

challenges, since the institution’s inception in
1966, have been iled between 2010 and Sept. in addition to requiring the arbitrators to dis- igures demonstrate that of the 41 arbitra- into assembling a panel, but the relatively
1, 2014.2 Moreover, three of the only four chal- close any relationships or facts that might tors who were unable to serve due to inde- short time necessary for the institution to
lenges granted in ICSID’s history occurred dur- cause their independence or impartiality to be pendence or impartiality concerns in 2013, conirm the tribunal may be well worth it,
ing that time. This upsurge, however, does not questioned, both the ICC Court and the LCIA over 90 percent of them were removed at the as late challenges can be truly disruptive,
appear to be true of challenges in international Court must conirm arbitrators appointed by conirmation stage. Similarly, in 2014, the ICC particularly where the arbitration has been
commercial arbitration. Three leading institu- the parties before the tribunal can be consti- declined to conirm the nomination of 48 out going on for years.
tions in this area—the ICC International Court tuted.3 The AAA employs a similar process of 1,327 arbitrators, or 3.62 percent.8 Sixty Time Limits. Limits on the time within
of Arbitration (ICC), the American Arbitration where the conlicts of appointed arbitrators challenges were brought that year, but only which a challenge can be brought may also

Association (AAA), and the London Court of are reviewed before the tribunal is formed. ive were upheld.9 Again, more than 90 per- contribute to reducing the number of arbi-
International Arbitration (LCIA)—report that These processes enable the LCIA, the ICC, cent of the arbitrators were disqualiied at the trator challenges. The ICC gives parties 30
the percentage of challenges brought before and the AAA, at the outset, to reject arbitra- conirmation stage in 2014. LCIA challenges days to submit a challenge, measured from
them has remained steady over the last 10 to tors whose disclosures may otherwise render are low as well. Only 33 challenges have been the date of the arbitrator’s appointment or
20 years. In fact, in the last three years, the them susceptible to a challenge and delay iled from 2011 to 2015, and just ive resulted “when the party making the challenge was
number of LCIA challenges appears to have the arbitration later.
in disqualiication of the arbitrator. Although informed of the facts and circumstances on
decreased from nine in 2013 to six in 2015. Repeat appointments, for example, which AAA challenges are higher in number, with which the challenge is based.”10 The LCIA
We consider two procedural mechanisms that are common in ICC arbitrations, and are 171 iled last year, this institution handles employs a similar procedure but gives
may have contributed to the ability of these discussed further below, are sometimes many more arbitrations—about 20,000 com- parties only 14 days to file such a chal-

commercial arbitral institutions to limit the addressed at the conirmation stage.4 In one mercial arbitrations alone were iled in 2015. lenge.11 The AAA requires that challenges
number of challenges: (1) a conirmation or instance, the ICC Court did not conirm an Additionally, the AAA’s international arm, the be brought “at the irst available opportu-
review of conlicts process and (2) time limits arbitrator who had served in ive cases involv- International Centre for Dispute Resolution nity,” and its Administrative Review Coun-
on challenge ilings.
ing one of the parties, one of which was pend- (ICDR), which receives about 30-40 challenges cil evaluates challenges weekly (or even
Conirmation/Review of Conlicts Pro- ing at time of the conirmation.5 Comparing each year, has reported that challenges have sooner), enabling parties to receive a deci-
cess. One of the reasons why the LCIA, the ICC conirmation and challenge statistics also been declining recently.
sion quickly.12 ICSID requires challenges to
ICC, and the AAA may have been able to demonstrates the eficiencies of this process. The confirmation process provides an be brought “promptly,” but provides little
prevent challenges from increasing is that
For example, in 2013, 1,329 arbitrators were opportunity, at the beginning of the proceed- guidance as to what is “prompt.”13 ICSID

appointed in ICC arbitrations, but the ICC ing, to lush out potential independence and will consider challenges that are submitted
Court did not conirm 37, or 2.78 percent, impartiality issues and reduce the likelihood “before the proceeding is declared closed,”
ERIC ORDWAY is a partner at Weil, Gotshal & Manges, of them due to the arbitrator’s lack of inde- that legitimate challenges will be brought meaning until the parties have completed
where he is a leading member of the international pendence or impartiality.6 By contrast, while later, after the arbitrators have spent a great presenting their case to the panel. Further,
arbitration and trade practice. LAUREN A. JACOBSON 66 arbitrators were challenged in 43 cases deal of time participating in the case. Add- the proceeding will be suspended while the
is an associate at the irm.
in 2013, only four were disqualiied.7 These
ing this conirmation step builds some delay
challenge is evaluated.14