Coming to arbitration practice from years on the bench, I was somewhat surprised to encounter party-appointed arbitrators who were not entirely impartial. Because commercial arbitration has its roots in labor arbitration and collective bargaining negotiations with company and union representatives playing key roles, the practice spilled over into our domestic arbitration world. It took the form of tripartite arbitration where each party selects an arbitrator and then the party-appointed arbitrators choose an impartial chair to lead the arbitration. But what is to be expected from the not-so-impartial “wings?”
A starting principle is that each arbitrator is subject to challenge if it can be shown that there is a conflict that has compromised his or her independence or impartiality. Such challenges are expressed in a motion to vacate an award on the grounds of evident partiality, one of the limited bases upon which arbitration awards are vulnerable. The federal arbitration act and the Maryland arbitration act contain provisions authorizing a court to vacate an award on these grounds.
The question then is what is permissible partiality. While the American Arbitration Association Code of Ethics for Arbitration in Commercial Disputes establishes ethical guidelines for party-appointed arbitrators, to a large degree the arbitrator’s conduct is left to his or her conscience to determine.
Some considerations to be recommended to party appointed arbitrators include:
- Advising all parties at the outset whether an arbitrator will be neutral or non-neutral.
- Carefully making full disclosure of all interests and relationships that could give rise to conflicts.
- Limiting consultation with the appointing party and/or its counsel to the pre-arbitration selection of the impartial chair.
- Disclosing to all parties and counsel the intent to communicate with the appointing party prior to commencement of the proceedings and the fact that any such communication has occurred.
- Assisting the appointing party by clarifying issues during the arbitration with questions to witnesses and/or counsel.
- Avoiding any communications with the appointing party concerning matters under consideration by the panel, deliberations, or any interim or final panel decisions until disclosed to all parties.
- Overcoming a predisposition in favor of the appointing party when its claims or defenses prove to lack merit.
Some commentators believe that a “screened selection” process for party-appointed arbitrators is a best practice. In a screened system, the parties designate arbitrator candidates and then select from a list compiled by the agency administering the arbitration, with the right to object to candidates on the basis of independence and impartiality. The agency then appoints the arbitrator in the order of preference indicated by the parties, excluding candidates subject to objection.
This process enhances the legitimacy of the arbitration and serves to protect the final award from challenge for avoidable conflicts. Where available, it appears to be a helpful way of avoiding fatal conflicts from the very start of the process.
Judge Albert J. Matricciani, Jr. (Ret.) is president of ADR MARYLAND and senior counsel at Whiteford, Taylor & Preston LLP in Baltimore. He may be reached [email protected]