Guerrilla tactics in Arbitration
Author: Parth Bathla, FIMT, GGSIPU, Delhi.
Efficiency in international arbitration has been highly criticized, as recent surveys reveal that users of arbitration perceive increased cost and reduced speed as the main disadvantages of international arbitration. This thesis analyses the cause of these delays in arbitral proceedings, where all parts of the arbitral chain are at fault, parties, arbitrators and institutions. The perceived reluctance by tribunals to act decisively in certain situations for fear of the award being challenged, frequently called ‘due process paranoia’, is considered to be the main factor of arbitrators’ inhibition to conduct proceedings efficiently. Institutions have contributed greatly to solve the problem of lack of efficiency with a regulatory framework that provides the parties and the arbitrators with various tools to conduct the proceedings in an efficient and cost- effective way. However, the inhibition to make efficient use of those rules and act decisively in situations where the parties employ dilatory tactics is a remaining barrier of efficient arbitral proceedings. An analysis of case law from various jurisdictions, where the courts’ approach to the procedural discretion of arbitrators is analyzed, reveals that due process paranoia is unjustified, as courts show great respect to arbitrators’ procedural choices and are reluctant to interfere with such decisions, unless extreme circumstances apply. Although, due process should not be sacrificed at the altar of efficiency, arbitrators should be less hesitant to make decisive procedural decisions and make better use of the efficient framework the arbitral institutions have provided, and thereby safeguarding the right of the parties to obtain a conclusion of their dispute in a reasonable time.
With globalization and advances in commerce and technology, the need for legal systems to adapt to mechanisms for enhancing alternative dispute resolution (ADR) methods continues to grow. The rising popularity of ADR can be explained by the increasing number of cases being handled by the traditional courts and the attendant delays, the perception that ADR imposes lower costs than litigation, a preference for confidentiality and the desire of some parties to have greater control over the selection of the individuals who will settle their dispute on the basis of competence, experience and absence of bias.
In dealing with guerrilla tactics in International Arbitration, it is paramount to first and foremost understand the consequence of the phrase “international arbitration” in relation to the subject of discourse, especially as terms in common use often elude definition.
It is sometimes said that every arbitration is a national arbitration in the sense that it must be held at a given place and is accordingly, subject to the national law of that place. Whilst this may be an interesting topic for debate, in practice, it is customary to distinguish between arbitrations which are purely “domestic” and those which are “international”.
International arbitration is a process used by parties from different states to determine their disputes before an impartial tribunal appointed by a commonly agreed method. International arbitration therefore, would simply suggest that parties to the arbitration are in different states or countries. Under the UNCITRAL Model Law, arbitration is international if:
a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or
b) one of the following places is situated outside the State in which the parties have their places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;
(ii) any place where a substantial part of the obligation of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or
c) the parties have expressly agreed that the subject-matter of the arbitrationagreement relates to more than one country.”
Experience has confirmed the long-standing advantages of arbitration as compared to dispute resolution before domestic courts, some of which are:
– Neutrality of the dispute resolution forum;
– Legal and/or technical/commercial/cultural expertise of the arbitrators;
– Flexibility and confidentiality of the proceedings;
– Finality of the award; and
– Worldwide (International) enforceability of the award under the New York Convention.
What Constitutes Guerilla Tactics in International Arbitration?
Parties to international business transactions are often driven by a desire to preserve their business relationship and prefer the friendly atmosphere of arbitral proceedings.6 However, subscribers to international arbitration increasingly complain about the length and cost and more recently, the tactics adopted by lawyers in the course of arbitral proceedings. These complaints reveal that arbitration has fallen victim of its own success. It has now become glaring that the lee-ways and advantages synonymous with arbitration also give room for disadvantages and procedures that are too notorious to be considered merely as bad behaviour.
Adverse conduct by parties/attorneys/lawyers in the course of arbitration proceedings may otherwise be regarded as bad behavior. However, the term guerrilla tactic is often used to describe those actions which are perceived as more hostile practices displayed by parties in arbitration in an attempt to gain a better advantage over the opposing party. Till date, there is lack of clear definition of Guerilla Tactics in International Arbitration. This accounts for why conduct identified by some attorneys as ‘guerilla tactics’ would be defended by others as legitimate strategy, or even as part of an attorney’s obligation to diligently represent the client’s interest.
The list of what constitutes Guerilla Tactics in international arbitration is long and sometimes can hardly be distinguished from bad behaviour on the part of parties or counsel representing parties in an international arbitration. The following have been identified as Guerilla Tactics in international arbitration.
Convincing an arbitrator to go home rather than attend deliberations;
– death threats;
– changing counsel mid-proceedings to create a conflict with an arbitrator;
– wiretapping opposing counsel’s meeting rooms;
– hiding damaging documents that were ordered to be disclosed;
– raising many challenges to a single arbitral tribunal;
– physically assaulting the opposing party;
– raising excessive frivolous objections to ‘run the clock’ at an evidentiary hearing;
– threatening a witness to dissuade him from testifying; and
– absurdly excessive requests for document disclosure.
The diversity of commercial disputes results in a complex combination of different legal, regulatory and ethical background amongst the arbitrators and legal practitioners. There is no universal standard or body of rules or regulations to guide the ethics and procedures of parties in arbitration proceedings. There are however, different international bodies and institution that have made available rules and principles of ethics to bind the conduct of parties in arbitration proceedings but the parties will have to agree to be bound by those rules and principles in the first place. An example is the International Bar Association Rules of Ethics for International Arbitrators.
FACTORS RESPONSIBLE FOR THE RISE IN THE USE OF GUERILLA TACTICS
IN INTERNATIONAL ARBITRATION
First, there is the absence of a uniform legal framework regulating ethical conduct of counsel in international arbitration. Ethical issues that are prevalent in international arbitration are numerous and range from conflict of interest, incompetence, lack of candor, dishonesty, and improper communications with opposing parties, to improper arrangements for remuneration for legal representation.10 These ethical issues often metamorphose into “guerilla tactics” in international arbitration. For instance, where a counsel who is incompetent in an international arbitration resorts to death threats to intimidate a fellow counsel; or where a counsel raises many challenges against a single tribunal arising from dishonesty.
Counsel representing parties in international arbitration usually come from different regulatory backgrounds with respect to laws that govern their professional conduct. As Mosk rightly pointed out, different regimes have a variety of rules or laws applicable to these ethical issues enumerated above. It is also relevant to point out that the extent to which choice of legal principles can govern professional conduct issues cannot be determined easily.
Secondly, erring counsel in international arbitration proceedings cannot be subjected to any forum-state disciplinary system or mechanism as is the case with the judicial system. As there is no uniform code of conduct that binds counsel in international arbitration, there is also no chance of prosecuting or sanctioning any erring counsel or counsel adopting Guerrilla tactics in international arbitration. For instance every state has prescribed punishment or sanctions for counsel that violates the code or rules of the legal profession unlike in international arbitration. There is no oath in international arbitration which the violation can result in prosecution. In situations like this, counsel resort to all sorts of tactics including Guerrilla tactics which serve to favour their clients or their selfish interests.
Thirdly, international arbitral tribunals have very little or limited powers to discipline counsel or parties that engage in conduct that is unacceptable and may be termed Guerrilla tactics because counsel appearing before an international arbitral tribunal are not licensed or regulated by that particular tribunal, they can afford to hide damaging evidence or treat a witness unfairly and with impunity.
Another issue or factor responsible for counsel engaging in acts which may be described as guerrilla tactics is that arbitrators are usually paid by parties and appointed by the counsel representing parties. Therefore, this creates a likelihood of bias on the part of arbitrators, and they are more likely to indulge counsel or parties that adopt guerrilla tactics. This raises the 6 issue of arbitrators’ independence and resoluteness. It has been argued that the concept of the “impartiality of party-appointed arbitrators” is mere pretence.
Tackling Guerilla Tactics in International Arbitration
Consequently, where parties from two different countries decide to settle their dispute by arbitration, there is bound to be a clash of ethics. A common example is the practice of Ex parte communication which is common in some countries like China and even Nigeria but may be abhorred in other jurisdictions. The act of an arbitrator acting as a mediator and speaking to one party in the absence of another will be a ground to challenge the impartiality and independence of an arbitrator.
The principles of arbitration are the same as those for natural justice – Audi alteram partem which means that both parties should be heard and Nemo judex in causa sua which means no man should be a judge in his own case. The principles in administrative law, are to ensure that the decisions of tribunals and governmental agencies are reached in a proper manner ensuring that all the parties are heard fairly and the decision is reached fairly too. Article 18 UNICITRAL Model Law safeguards the parties’ basic procedural right of equal treatment and their right to be heard as the essential principles of arbitral due process. These basic procedural rights constitute the ‘magna carta’ of any arbitration.
‘Unfortunately, the cardinal principles of natural justice and fair play that govern the resolution of disputes through arbitration, give the unscrupulous party and his wily lawyers a lot of scope. They will put the claimant to proof of each and every fact that has to be proved.
They will find particulars and further and better discovery, the further the better discovery wears down the claimant’s patience, eats into his pocket, and delays the dreadful hour of having to part with money. Attempts to fix an early date for hearing will be met with gloomy forecasts of its duration, and pleas for sympathy on behalf of counsel with no dates free until late next year’.
The above quote gives a general but succinct description of the guerrilla tactics being used to delay and frustrate the claimant in an arbitration proceeding. The attempt will generally be to wear the claimant out until he has no will to push the case any further. Of course there is usually a lot of money hanging as the subject matter in arbitration disputes so a complete back down will just be wishful thinking. The fact that the adversarial system of litigation where the aim to hear both parties and decide fairly is also the downfall of arbitration. Arbitration tribunals however, do not have the judicial powers to dismiss poorly arbitrated proceedings for lack of diligent prosecution or award cost for delays like in litigation. As arbitration is based on contract, some of these powers of the judges in litigation which are taken for granted are a necessity.
Challenging Appointed Arbitration
It is a window provided for by most countries and international institutions to ensure fair hearing in international arbitration. If a party reasonably suspects that an arbitrator is not independent and/or impartial, he has the right to challenge the arbitrator claiming that arbitrator is compromised and therefore will give an unfair and biased award. The dictum ‘nemo debet esse judex in propria causa’ is a principle of natural justice and it means that a party cannot be an arbitrator in his own case. It is also backed up by the IBA Guideline which provides that “no one is allowed to be his or her own judge” (i.e, there can be no identity between an arbitrator and aparty). Although in Gary B. Born’s International Commercial Arbitration20, the author separates the features in disputes over an arbitrator’s independence and impartiality into different sub headings, I will classify them as different aspects of the principle that no man shall be a judge in his own cause.
Therefore, it is advised that parties should refrain from appointing arbitrators who have a pecuniary interest or otherwise in the disputes no matter how remote, arbitrators who are in the employment of a party to the dispute, or had prior involvement in the dispute, business, personal or family relationship with a party and prior representation of a party amongst others. It translates to the point that only experienced arbitrators should be involved in international arbitration. The arbitrators should practice full disclosure of conflict of interest, refrain from making comments or expressions of opinion during the arbitral proceedings, and, avoid ex parte contacts during arbitration as some institutional rules and international rules forbids it.
Dealing with Guerrilla Tactics that are Unethical
This quote “International arbitration dwells in an ethical no-man’s land” , is an apt description of the peculiar nature of international arbitration and consequently the avenue that allows for guerrilla tactics. This is because proceedings are not regulated by the national laws that regulate arbitration on a local platform and therefore ethics and professionalism are sometimes sacrificed on the altar of freedom. The core substantial and procedural standards that a counsel should abide by are often abandoned and what is supposed to be a civilized dispute settlement becomes white-collar guerrilla warfare.
The core principles of a lawyer’s professional conduct include “the lawyer’s obligation zealously to protect and pursue a client’s legitimate interests, within the bounds of the law, while maintaining a professional, courteous and civil attitude toward all persons involved in the legal system”.
The understanding of some lawyers practicing guerrilla tactics may be hinged on the desire to earn their fees. They believe that the tactics are mere necessities to ensure they are zealously protecting and pursuing a client’s legitimate interest.As a general rule, arbitral tribunals may order whatever measures they deem necessary to protect the rights of the requesting party from harm that cannot later be remedied by the final award; or they may regulate the relationship between the parties during the arbitral proceedings.
With the forum of international arbitration being likened to an ethical no man’s land, counsel are determined to win at all costs. Scenarios are skillfully manipulated by counsel and parties like opponents in a game of chess. This has given rise to the need to checkmate the use of unethical strategies by counsel. Aristotle’s belief that nature abhors a vacuum is justified by the range of guerrilla tactics employed by counsel in international arbitration. Their creativity is fuelled by the impunity enjoyed by the parties to an international arbitration. Riding on the waves of globalization is the urgent need for the inclusion of international standards of ethical conduct to fill the current vacuum. Clearly, a balance has to be struck in order to ensure that the virtues for which arbitration is favoured are not turned into a vice. The intendment and spirit of arbitration must be upheld to ensure its continued relevance.
This paper is therefore an appeal for the enactment of binding regulations on codes of conduct to be adopted by parties and counsel to an international arbitration. Arbitral tribunals may also, without fear or favour, harness the full potential of their arbitral powers and ensure that neither party nor counsel to an international arbitration is allowed to unscrupulously manipulate proceedings. The enactment and enforcement of binding regulations on codes of conduct would not only accelerate arbitration and reduce costs, but also concretize its position as a foremost alternative dispute resolution mechanism. Arbitration is after all, a means to an end which is justice, and justice must not only be done, but must also be seen to be done.
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